1. What is Risk Calculation?

Risk calculation is a fundamental concept in decision-making that combines the probability of an event occurring with the impact or consequence of that event. It helps quantify potential losses or negative outcomes.

2. How Does the Calculator Work?

The calculator uses the basic risk equation:

Where:

• \( Probability \) — Likelihood of event occurring (0 to 1 scale)
• \( Impact \) — Magnitude of consequence (can be in dollars, severity scale, etc.)

Explanation: The equation provides a simple quantitative measure of risk by multiplying the chance of something happening by how bad it would be if it happened.

3. Importance of Risk Assessment

Details: Risk calculation is essential for informed decision-making in business, finance, project management, safety planning, and many other fields. It helps prioritize resources and mitigation strategies.

4. Using the Calculator

Tips: Enter probability as a decimal between 0 (impossible) and 1 (certain). Impact can be in any consistent units (dollars, severity points, etc.). Higher values indicate greater risk.

5. Frequently Asked Questions (FAQ)

Q1: What's considered a "high" risk value?
A: This depends on context. Generally, risks above 0.5 (probability × impact) require mitigation, but thresholds vary by application.

Q2: How should I scale the impact?
A: Use consistent units appropriate to your context (e.g., dollars for financial risk, 1-10 severity scale for safety risks).

Q3: Can probability be greater than 1?
A: No, probability must be between 0 (never happens) and 1 (always happens).

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

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