Understanding Risk

Risk is the likelihood and

impact of an event that you
aren’t certain will occur.
Understanding Risk

Risk = Likelihood x Impact

Likelihood:
Probability that a situation
will occur.

Impact:
the outcome of
that situation.
Risk Matrix
Impact

Medium-Low Medium-High Highest Highest Highest

Medium-Low Medium-High Medium-High Highest Highest

Likelihood

Lowest Medium-Low Medium-High Medium-High Highest

Lowest Medium-Low Medium-Low Medium-High Medium-High

Lowest Lowest Lowest Medium-Low Medium-Low

Risk Matrix Example

Risk = Likelihood x Impact Impact

Risk = 3 x 4 1 2 3 4 5

5 5 10 15 20 25

Risk score = 12 4 4 8 12 16 20

Likelihood
3 3 6 9 12 15

2 3 4 6 8 10

1 1 2 3 4 5
Risk curve example

But risks are often more complex

than this.

  Impact

1 2 3 4 5
Likelihood Negligible Minor Moderate Severe Very severe

5 5 10 15 20 25
Very likely

4 4 8 12 16 20
Likely

3 3 6 9 12 15
Moderately

2 2 4 6 8 10
Unlikely

1 1 2 3 4 5
Very unlikely
0
0 0 0 0 0
Impossible
Risk curve example
Risk = Likelihood x Impact
Risk =
Neg. 4x1=4   Impact

1 2 3 4 5
Likelihood Negligible Minor Moderate Severe Very severe

5 5 10 15 20 25
Very likely

4 4 8 12 16 20
Likely

3 3 6 9 12 15
Moderately

2 2 4 6 8 10
Unlikely

1 1 2 3 4 5
Very unlikely
0
0 0 0 0 0
Impossible
Risk curve example
Risk = Likelihood x Impact
Risk =
Neg. 4x1=4   Impact

Minor 3 x 2 = 6 1 2 3 4 5
Likelihood Negligible Minor Moderate Severe Very severe

5 5 10 15 20 25
Very likely

4 4 8 12 16 20
Likely

3 3 6 9 12 15
Moderately

2 2 4 6 8 10
Unlikely

1 1 2 3 4 5
Very unlikely
0
0 0 0 0 0
Impossible
Risk curve example
Risk = Likelihood x Impact
Risk =
Neg. 4x1=4   Impact

Minor 3 x 2 = 6 1 2 3 4 5
Likelihood Negligible Minor Moderate Severe Very severe
Moderate 2 x 3 = 6 5 5 10 15 20 25
Very likely

4 4 8 12 16 20
Likely

3 3 6 9 12 15
Moderately

2 2 4 6 8 10
Unlikely

1 1 2 3 4 5
Very unlikely
0
0 0 0 0 0
Impossible
Risk curve example
Risk = Likelihood x Impact
Risk =
Neg. 4x1=4   Impact

Minor 3 x 2 = 6 1 2 3 4 5
Likelihood Negligible Minor Moderate Severe Very severe
Moderate 2 x 3 = 6 5 5 10 15 20 25
Very likely
Severe 1x4=4 4 4 8 12 16 20
Likely

3 3 6 9 12 15
Moderately

2 2 4 6 8 10
Unlikely

1 1 2 3 4 5
Very unlikely
0
0 0 0 0 0
Impossible
Risk curve example
Risk = Likelihood x Impact
Risk =
Neg. 4x1=4   Impact

Minor 3 x 2 = 6 1 2 3 4 5
Likelihood Negligible Minor Moderate Severe Very severe
Moderate 2 x 3 = 6 5 5 10 15 20 25
Very likely
Severe 1x4=4 4 4 8 12 16 20

V. severe 0 x 5 = 0 3
Likely

3 6 9 12 15
Moderately

2 2 4 6 8 10
Unlikely

1 1 2 3 4 5
Very unlikely
0
0 0 0 0 0
Impossible
Risk curve example
Risk = Likelihood x Impact
Risk =
4x1= 4   Impact

3x2= 6 1 2 3 4 5
Likelihood Negligible Minor Moderate Severe Very severe
2x3= 6 5 5 10 15 20 25
Very likely
1x4= 4 4 4 8 12 16 20

0x5= +0 3
Likely

3 6 9 12 15
Moderately

Risk score = 20 2
Unlikely
2 4 6 8 10

1 1 2 3 4 5
Very unlikely
0
0 0 0 0 0
Impossible