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top   »  risk   »  risk management   »  risk identification   »  risk probability vs risk impact

Risk Probability vs Risk Impact

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Risk probability is the chance of a risk occurring.
Risk impact is the cost of a risk if it does occur.

Risk Probability vs Risk Impact

Risk probability and impact are two parameters that are commonly used to model risk. The following example illustrates the risks associated with giving a toddler a big cookie.
Risks of Giving a Toddler a Big Cookie
Risk
Probability
Impact
Drops cookie on floor
5%
Need to replace cookie and vacuum
Gets crumbs on floor
20%
Need to vacuum
Risks may be modeled with a probability-impact matrix like the table above or a probability distribution that represents probability-to-impact as a curve. For example, an automobile may incur damage anywhere from a $100 small scratch up to a total write off with each level of loss having a different probability of occurring.
Risk Probability vs Risk Impact
Risk Probability
Risk Impact
Definition
The chance that a risk will occur.
The cost when a risk does occur.

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