Risk Probability and Impact Assessment Example

Risk probability and impact assessment is a two-dimensional technique used to rate the likelihood of an event occurring and its potential consequences. This method provides greater discrimination than the traditional Low, Medium, and High scale, making it a valuable tool for risk assessments.

In this article, we will explore how to use the Probability/Impact Assessment technique to evaluate risks and prioritize them based on their level of impact and probability. We will also look at two methods of qualitative risk analysis: the KISS Method and the Probability/Impact Assessment method.

The KISS Method

The KISS (Keep It Super Simple) Method is a one-dimensional technique that involves rating risks as High, Medium, or Low based on their likelihood of occurrence. This method is suitable for smaller projects and teams with limited experience in risk assessments.

Probability/Impact Assessment

The Probability/Impact Assessment method is a two-dimensional technique that rates risks based on both their probability and impact. This method provides greater discrimination than the KISS Method, allowing for more precise evaluations of risks.

To use this method, you need to define your own criteria for rating probability and impact. You can use a scale such as:

* Probability: Low (1-20%), Medium (21-60%), High (61-100%)

* Impact: Low (minor consequences), Medium (moderate consequences), High (significant consequences)

For example, if you are assessing the risk of a project delay, you might rate its probability as Medium (41-60%) and impact as High (significant consequences).

Prioritizing Risks

The goal of evaluating risks is to identify the most critical ones that require immediate attention. By using the Probability/Impact Assessment method, you can prioritize your risks based on their level of impact and probability.

To do this, you need to assign a score to each risk based on its probability and impact. You can then calculate the overall score by multiplying the probability and impact scores.

For example, if a risk has a probability score of 5 (Medium) and an impact score of 8 (High), its overall score would be 40. This would indicate that this risk requires immediate attention and mitigation strategies should be implemented to minimize its potential consequences.

Risk probability and impact assessment is a valuable technique for evaluating risks and prioritizing them based on their level of impact and probability. By using this method, you can identify the most critical risks that require immediate attention and develop effective response plans to mitigate their potential consequences.

Remember to specify your risk analysis technique(s) in your Risk Management Plan and capture and maintain your risk ratings in your risk register. It is also essential to check with your organization to determine whether there is a definition of risk scales.

By using the Probability/Impact Assessment method, you can ensure that your risk assessments are thorough, accurate, and effective in identifying the most critical risks that require attention.

Risk probability and impact assessment example