Risk assessment is the process of identifying risks and evaluating their probability and impact. Probability is the potential for the risk to occur. Impact is the damage that results from the risk when it does occur. Probability/impact can be modeled as single estimates such as a 4% probability of a $1 million dollar loss. A more sophisticated method is to model probability/impact as a probability distribution that produces a graph of the probability of different levels of losses for a given risk. The following are illustrative risk assessment examples.
Project ManagementA project team brainstorms risks with the input of the entire team and required subject matter experts such as an information security professional. They estimate probability and impact for each risk in a probability/impact matrix.
Program ManagementAn IT program composed of dozens of projects models the risk of projects being late or overbudget using reference class forecasting, a method of comparing projects to historical projects with similar scope and risk profiles.
Equity AnalystAn equity analyst develops indepth knowledge about a company and its industry in order to evaluate risks and rewards associated with a stock. If they downgrade a stock they may provide a list of high level risks associated with the firm in a note to investors.
Risk AnalystA risk analyst may use statistical analysis to evaluate the risks associated with a particular investment or class of investments. They may use a large number of variables to estimate the probability of losses as a probability distribution. For example, the probability of a 10% loss on a particular investment might be 3% and the probability of a 100% loss might be 0.3%.
Small BusinessA small business lists out risks associated with a strategy to open a new retail location. They evaluate probabilities on a scale of 1-4 labeled as "very likely", "likely", "possible", "remotely possible". They evaluate impact on a scale of 1-4 labeled as "disaster", "high", "medium", "low." The business then uses the evaluations to prioritize efforts to avoid, transfer, reduce or accept each risk.
This is the complete list of articles we have written about risks.
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A list of common business risks.
The four things that can be done about risk.
A list of techniques for reducing risk.
The potential that you'll achieve too much of a good thing.
Any risk that people have a strong aversion too.
The surprising similarities between risk and opportunity.
The difference between risk management and contingency planning.
The common types of uncertainty in decision making and strategy.
The common types of inventory risk.
An overview of common business risk management techniques.
An overview of the risk management process.
An overview of cascading failure and resilience.
An overview of business as usual.
The difference between risk mitigation and risk reduction.
A list of common risk controls.
A definition of risk value with example calculation.
The common types of risk impact.
A definition of risk communication with examples.
Overview of the steps in a risk management process.
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