A risk probability is the chance that a risk will occur. By definition, a risk is a probability of a loss. As such, risks are modeled with probabilities and impacts. The following are common ways to model risk probability.
Qualitative ProbabilitiesIn many cases, a risk probability is an educated guess that is modeled with a rating system such as low, medium and high probability. For example, a project team may identify risks and rate them according to the expert opinion of team members.
Quantitative ProbabilitiesA detailed risk analysis may allow a number to be assigned to risk probabilities. These are typically a percentage such as 60% represented as 0.6.
Discrete Probability DistributionsA single risk often has multiple probabilities associated with it. For example, a fire risk can range from a building completely burning down to minor damage. It is common to break out the probability of each level of impact as a discrete probability distribution that can be represented as a table of probabilities and impacts.
Continuous Probability DistributionA discrete probability distribution lists out a number of probabilities and associated impacts. For example, the chance of $2000 and $1000 fire damage might be listed in a table. A continuous probability distribution is a more accurate model that provides a probability for any impact such as the probability of $1033.37 of damage. This is represented as a mathematical formula and smooth curve as opposed to a table and a bar chart.
This is the complete list of articles we have written about risk management.
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A complete guide to risk analysis.
A definition of qualitative risk analysis with an example.
A definition of cost of risk with examples.
A definition of risk perception with examples.
The difference between a risk and a hazard with examples.
An overview of threats for SWOT analysis with examples.
The definition of what-if analysis with examples.
A list of common external factors.
A definition of risk exposure with example calculations.
An overview of the risk management process.
An overview of cascading failure and resilience.
An overview of business as usual.
A list of techniques for reducing risk.
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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