1. What Is Risk Calculation?

Risk calculation is a fundamental concept in risk management that quantifies potential negative outcomes by multiplying the probability of an event occurring by the impact if it does occur.

2. How Does The Calculator Work?

The calculator uses the basic risk equation:

Where:

• \( Probability \) — Likelihood of event occurring (0 to 1)
• \( Impact \) — Magnitude of effect if event occurs (any positive number)

Explanation: This simple multiplication gives a quantitative measure of risk that can be used to compare different risks or prioritize risk mitigation efforts.

3. Importance Of Risk Assessment

Details: Proper risk calculation helps organizations and individuals make informed decisions, allocate resources effectively, and prioritize which risks need mitigation.

4. Using The Calculator

Tips: Enter probability as a decimal between 0 and 1 (e.g., 0.25 for 25% chance). Impact can be any positive number representing the severity of consequences.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between probability and impact?
A: Probability measures how likely an event is to occur, while impact measures how severe the consequences would be if it did occur.

Q2: How should I interpret the risk score?
A: Higher scores indicate greater risk. Typically risks are categorized as Low (0-0.3), Medium (0.3-0.7), and High (0.7-1.0) when using normalized scales.

Q3: Can I use percentages for probability?
A: Yes, but convert to decimal first (e.g., 25% = 0.25). The calculator expects decimal input.

Q4: What units should impact be in?
A: Impact can be in any consistent units (dollars, hours, severity scale points) depending on your specific risk assessment needs.

Q5: Are there more advanced risk formulas?
A: Yes, for complex scenarios you might use formulas that account for multiple probabilities, cascading effects, or non-linear relationships.