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7 Steps for Risk Evaluation

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Risk evaluation is the process of identifying and measuring risk. It is a fundamental business practice that can be applied to investments, strategies, commercial agreements, programs, projects and operations. The following are the basic steps of a risk evaluation process.


All stakeholders are asked to identify risk. This helps to improve acceptance of an initiative as everyone is given an opportunity to express all the things that can go wrong. Sophisticated entities may also identify risks by looking at databases of issues that occurred with similar programs, strategies or projects.

Probability & Impact

Estimating the probability and impact of each identified risk. This can be done as a rough estimate such as high, medium or low. In reality, most risks don't have a single cost but a probability distribution of possible costs. For example, the risk of a traffic accident isn't a single cost but a range of costs each with an associated probability estimate. Sophisticated entities such as insurance companies will model risks with probability distributions. Projects may estimate risks with a probability-impact matrix.

Moment Of Risk

Listing out the specific conditions that cause the risk to be more likely to occur. For example, the risk of a type of injury at a construction site may be associated with a particular activity or construction stage.


Risk treatment options include acceptance, mitigation, transfer, sharing and avoidance. When a risk is mitigated or shared the probability and impact typically need to be reevaluated.

Secondary Risk

Evaluation of risks caused by treatments. For example, avoiding or mitigating a risk can result in new risks.

Residual Risk

Calculating the probability and impact of remaining risk after treatment. For example, the risk that remains after mitigation including secondary risk.

Monitoring & Review

Regularly identifying new risks that become clear as a program or project progresses. Overseeing the implementation of risk treatment and evaluating results.
Overview: Risk Evaluation
The process of identifying risk and estimating probability and impact.
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This is the complete list of articles we have written about risks.
AI Risk
Risk Avoidance
Brand Risk
Budget Risk
Business Risks
Change Risk
Compliance Risk
Concentration Risk
Cost Risk
Country Risk
Credit Risk
Demand Risk
Dread Risk
Economic Risk
Exchange Rates
Existential Risk
External Risk
Financial Risk
Force Majeure
Good Risk
Human Error
Risk Identification
Infinite Risk
Inflation Risk
Inherent Risk
Interest Rates
Internal Risks
Investing Risk
Legal Risk
Liquidity Risk
Model Risk
Moment Of Risk
Natural Disasters
Negative Risk
Operations Risk
Passive Risk
Personal Risk
Political Risk
Process Risk
Procurement Risk
Product Risk
Project Risk
Pure Risk
Quality Risk
Recession Risk
Risk Mitigation
Refinancing Risk
Regulatory Risk
Reputational Risk
Residual Risk
Resource Risk
Revenue Risk
Risk Appetite
Risk Aversion
Risk Examples
Risk Management
Risk Management Process
Risk Matrix
Risk Meaning
Risk Measurement
Risk Taking
Risk Tolerance
Risk Triggers
Risk vs Issue
Risk vs Opportunity
Risk vs Uncertainty
Risk-Reward Ratio
Seasonal Risk
Secondary Risk
Security Risk
Settlement Risk
Risk Sharing
Speculative Risk
Strategic Risk
Strategy Risk
Supply Risk
Systemic Risk
Tactical Risk
Taxation Risk
Technology Risk
Risk Transfer
Unforced Error
Upside Risk
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