QUALITATIVE RISK ASSESSMENT

 Qualitative Risk Assessment

Risk Probability and Impact assessment generally finds answers to the following questions -

•  What is the probability that a risk will occur? 
•  What will it cost the business if it does happen? 
•  The Probability and Impact Matrix indicates which risks need to be managed 

Simple way of assessing a risk is by attaching a probability and impact to the happening of an event. If it is certain that an event cannot occur, it is given a probability of 0; if it is certain that it will occur, it is given a probability of 1. Similarly if the impact is significant it can be assigned a weight of 1 and where there is no impact the event can be assigned a weight of 0. Uncertain risks are assigned between 0 and 1 viz., 0.5. Maximum risk impact the event could generate is 1 and in case of uncertainty 0.5. The severity of the risk is a practical measure for quantifying risks that indicates the extent of harm a risk can cause. Generally during a risk assessment exercise a risk probability and impact matrix is prepared where the levels of risk severity are depicted through a colour scheme of red, green and yellow where red being the most severe or critical risk condition. This is also called as the traffic signal risk card.