1. What Is Risk Calculation?

Risk calculation is a fundamental process in risk management that quantifies potential threats by combining the likelihood of an event occurring with the severity of its consequences. This approach provides a systematic way to prioritize risks and allocate resources effectively.

2. How Does The Calculator Work?

The calculator uses the basic risk assessment formula:

Where:

• \( Risk \) — Risk score (quantified risk level)
• \( Probability \) — Likelihood of occurrence (0 to 1 scale)
• \( Impact \) — Severity of consequences (1 to 5 scale)

Explanation: This formula multiplies the probability of an event (expressed as a decimal between 0 and 1) by its potential impact (rated on a scale of 1 to 5) to generate a risk score that helps in decision-making and prioritization.

3. Importance Of Risk Assessment

Details: Proper risk assessment is crucial for identifying potential threats, evaluating their significance, and implementing appropriate mitigation strategies. It enables organizations to make informed decisions and allocate resources where they are most needed.

4. Using The Calculator

Tips: Enter probability as a decimal between 0 and 1 (where 0 means impossible and 1 means certain), and impact as an integer between 1 (minimal impact) and 5 (severe impact). The calculator will compute the risk score automatically.

5. Frequently Asked Questions (FAQ)

Q1: What does the risk score represent?
A: The risk score quantifies the overall risk level, with higher scores indicating greater risks that require more attention and resources for mitigation.

Q2: How should I interpret probability values?
A: Probability values range from 0 (impossible) to 1 (certain). Values like 0.1 represent low probability (10% chance), while 0.9 represents high probability (90% chance).

Q3: What do the impact scale numbers mean?
A: Impact is typically rated: 1 - Minimal, 2 - Minor, 3 - Moderate, 4 - Major, 5 - Severe/Catastrophic consequences.

Q4: Are there limitations to this simple formula?
A: While useful for basic assessment, complex risks may require additional factors like vulnerability, exposure, and risk appetite considerations for comprehensive evaluation.

Q5: How should risk scores be used in decision-making?
A: Risk scores help prioritize actions - higher scores typically require immediate attention and more robust mitigation strategies, while lower scores may be monitored or accepted.