1. What is Risk Calculation?

Risk calculation assesses risks based on likelihood (probability) and consequences (impact). It provides a quantitative measure to help prioritize and manage potential risks.

2. How Does the Calculator Work?

The calculator uses the basic risk equation:

Where:

• \( Probability \) — Likelihood of occurrence (0 to 1)
• \( Impact \) — Consequences if risk occurs (in appropriate units)

Explanation: The equation provides a simple but effective way to quantify risk by combining both the chance of occurrence and the severity of impact.

3. Importance of Risk Assessment

Details: Risk assessment is crucial for decision-making, resource allocation, and prioritizing mitigation efforts in business, finance, project management, and safety planning.

4. Using the Calculator

Tips: Enter probability as a decimal between 0 and 1 (where 0 = impossible, 1 = certain). Impact can be in any relevant units (dollars, severity scale, etc.). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What probability scale should I use?
A: Use a 0-1 scale where 0 means impossible and 1 means certain. Values in between represent varying likelihoods.

Q2: How should I quantify impact?
A: Impact can be measured in monetary terms, severity scale (e.g., 1-10), or other relevant units depending on context.

Q3: What's considered a "high" risk score?
A: This depends on context. Generally, higher scores indicate greater risks that may need mitigation.

Q4: Are there more complex risk models?
A: Yes, advanced models may consider multiple factors, correlations between risks, and time elements.

Q5: Can I use this for financial risk assessment?
A: Yes, this basic model can be used for financial risks when impact is measured in monetary terms.