1. What is Risk Calculation?

Risk calculation is a fundamental concept in risk management that quantifies potential negative outcomes by considering both the likelihood of an event occurring (probability) and the severity of its consequences (impact).

2. How Does the Calculator Work?

The calculator uses the basic risk equation:

Where:

• \( Probability \) — Likelihood of event occurring (0-1 scale)
• \( Impact \) — Severity of consequences (0-10 scale)

Explanation: The equation provides a simple yet effective way to quantify risk by multiplying these two fundamental components.

3. Importance of Risk Assessment

Details: Risk calculation helps prioritize risks, allocate resources effectively, and make informed decisions about risk mitigation strategies.

4. Using the Calculator

Tips: Enter probability as a decimal between 0 (impossible) and 1 (certain). Enter impact on a scale from 0 (no impact) to 10 (maximum impact).

5. Frequently Asked Questions (FAQ)

Q1: What is a "good" risk score?
A: Lower scores are better. Typically, risks above 0.5 (probability 0.5 × impact 1) or 0.3 × 2 etc. may need attention.

Q2: How should I determine probability and impact?
A: Use historical data for probability and expert judgment for impact. Standardized scales help maintain consistency.

Q3: Can I use different scales?
A: Yes, but ensure both components use compatible scales and adjust the interpretation accordingly.

Q4: What are the limitations of this simple model?
A: It doesn't account for risk correlations, secondary effects, or non-linear relationships between components.

Q5: How often should risks be recalculated?
A: Regularly, especially when conditions change or new information becomes available.