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# 4 Types of Risk Exposure

, updated on January 01, 2023
Risk exposure is an estimate of the probable costs of a risk or set of risks. This can be calculated for a strategy, program, project or initiative. There are four basic ways to calculate risk exposure:

## Single Value

The basic calculation for risk exposure is based on an estimate of the probability of a risk and its impact.
risk exposure = probability × impact

For example, if there is a 20% chance of a product failing on the market and the impact will cost you \$1 million.

risk exposure = 0.20 × \$1,000,000 = \$200,000
It should be noted that risk exposure as presented here isn't the maximum cost of the risk but the probable cost.

## Discrete

Many risks are too complex to model with a single estimate of probability and impact. In this case, a risk exposure can be measured with a matrix of discrete probabilities. For example, a product might have several different possible levels of failure on the market: Products usually generate some revenue, even if they fail. As such, the estimate of \$93,000 incorporates a range of possible failure levels.

## Continuous

Risk exposure can also be modeled as a continuous curve whereby a probability is given for every possible loss. For example, a product failure that can cost at most \$200,000 can be modeled with a probability for every possible dollar amount such as a 0.0004% chance of a \$10,000 loss and a 0.0003999% chance of a \$10,001 loss. ## Maximum

Risk exposure can also measure the maximum impact of a risk regardless of probability. This makes sense where you want to limit the worst case.
Fire risk exposure related to the facility has been capped at the insurance deductible of \$10,000 plus an estimated \$40,000 in costs not covered by insurance.
 Overview: Risk Exposure Type Definition (1) An estimate of the probable costs of a risk or set of risks for a period of time. Definition (2) An estimate of the maximum costs of a risk or set of risks for a period of time. Related Concepts

## Risk Management

This is the complete list of articles we have written about risk management.
Acceptable Risk
Calculated Risk
Contingency Plan
Contingency Planning
Disaster Preparedness
Economic Risk
ERM
Financial Risk
Innovation Risk
Insurance
Investing Risk
Moment Of Risk
Plan Template
Political Risk
Positive Risk
Project Risk
Reputational Risk
Residual Risk
Resilience
Resource Risk
Risk
Risk Acceptance
Risk Analysis
Risk Appetite
Risk Awareness
Risk Capacity
Risk Communication
Risk Contingency
Risk Control
Risk Culture
Risk Estimates
Risk Evaluation
Risk Exposure
Risk Impact
Risk Intelligence
Risk Management
Risk Matrix
Risk Measurement
Risk Mitigation
Risk Monitoring
Risk Objectives
Risk Prevention
Risk Probability
Risk Profile
Risk Reduction
Risk Register
Risk Response
Risk Sharing
Risk Taking
Risk Tolerance
Risk Treatment
Risk Trigger
Risk-Reward Ratio
Seasonal Risk
Secondary Risk
Special Risks
Strategy Risk
Tactical Risk
Technology Risk
Unknown Risks
Upside Risk
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