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13 Examples of Risk Measurements

A risk measurement is an estimate of a possible future loss. These include everyday estimates used in business and personal decision making whereby you may approximate the likelihood of some negative outcome and its impact. The following are illustrative examples of a risk measurement.


A risk is a probability of a future loss. As such, estimating probabilities is required to measure risk. The following are illustrative examples.
A 1% chance that a house in a high risk area will experience a flood within 5 years.
A 20% probability that a high risk investment will lose all of its value within 5 years.
A 30% chance that you will drop out of college without a degree.
A 60% probability that a small business will fail.
A 6% chance that you will not like your new house or neighborhood and feel compelled to move within 5 years.


Impact is the size of a loss associated with a risk. This can be measured in financial terms or in other ways such as quality of life.
A failed product that will cause $900,000 in losses.
An incomplete college education that is worth approximately $200,000 less than the opportunity costs incurred.
A work related injury that will cause a severe decline in quality of life and reduced lifetime earnings of $1.8 million.
A data center fire estimated to cause $40,000 damage, $900,000 in operational costs and $5.6 million in contractual penalties to customers.

Risk Matrix

In the real world, there are usually different levels of risk impact each with a different probability. For example, a product that completely fails on the market versus one that achieves some sales below target. These levels of risk impact can be modeled with a table of estimates known as a probability-impact matrix.

Continuous Estimates

Advanced risk management models in industries such as banking and insurance are based on probability distributions that give a probability for every possible impact.

Cost of Risk

Cost of risk is an estimate of the total cost of a risk or set of risks including the costs of treating risk. This would include all costs associated with risk management such as insurance as well as estimates of future losses due to risk.
Goal: reduce the cost of IT risk by 35% to 1.1 million in 2037.

Risk Reduction

It is possible to estimate how much you have saved by reducing a risk. For example, if land improvements reduce the chance of wild fire related damage at a hotel, the benefits of this project could be estimated in terms of risk reduction.
The land improvements are projected to reduce the chance of a fire at the facility by 14% per year. This is estimated to reduce future risk related losses by $460,000.


The examples above are illustrative as opposed to actual statistics or estimates.


This is the complete list of articles we have written about risk.
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
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Force Majeure
Good Risk
Human Error
Risk Identification
Infinite Risk
Inflation Risk
Inherent Risk
Interest Rates
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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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