Question

When performing Risk Analysis as part of the task Analyse Risk (which is part of the Strategy Analysis knowledge area of the Business Analysis Body of Knowledge), we may develop a risk register as a table of entries for each identified risk. For each identified risk we make a judgement about probability as being either low, medium or high. We also make a judgement about impact as being either low, medium, or high. These contribute to making a final judgement about the risk’s risk level as being either low, medium or high.

a) Explain the difference between probability of a risk and impact of a risk, and then describe what the difference between low and high judgement levels mean for these aspects of risk.

b) If a particular risk has been judged to have low probability but high impact, what might its final risk level be judged as?

c) If another particular risk has been judged to have high probability but low impact, what might its final risk level be judged as?

Answer 1

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a) Explain the difference between the probability of a risk and impact of a risk, and then describe what the difference between low and high judgment levels mean for these aspects of risk.

In risk analysis, the risk is characterized as a component of likelihood and effect. The likelihood is a probability of a function occurring and the consequences, to which the venture is influenced by a function, are the effects of danger. By joining the likelihood and effect, the Level of Risk can be resolved.

With the danger sway/likelihood outline, you map out each danger - and its position decides its need. High-probability/High-Impact ricks are generally basic/High-level dangers and you should invest a lot of energy into dealing with these. The low-likelihood/high-sway are decided as High-Level dangers and high-likelihood/low effect risks are next in need they are decided as moderate level dangers, however, you might need to receive different systems for each. Low-likelihood/low-sway dangers can regularly be disregarded as they are decided as low-level dangers.

b) If a particular risk has been judged to have low probability but high impact, what might its final risk level be judged as?

These will be decided as elevated level dangers. These are probably not going to occur, notwithstanding, you ought to do what to lessen the effect they will have in the event that they happen, and you ought to have contingency designs set up in the event that they do.

c) If another particular risk has been judged to have high probability but low impact, what might its final risk level be judged as?

These are decided as medium level danger - if these things occur, you can adapt to them and proceed onward. In any case, you should attempt to lessen the probability that they will happen.