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Thursday, 10 August 2017 21:41

Systematic Determination of Risks

Written by  MICHAEL C. REDMOND

Organizations know how important it is to manage risk. However, many risk evaluations are not done systematically. This is an introduction to the process steps and terms that should be understood. Risk is the effect – positive or negative – of an event or series of events that take place in one or several locations. It is computed from the probability of the event becoming an issue and the impact it would have. Various factors should be identified in order to analyze risk, including:Event: What could happen? Probability: How likely is it to happen? Impact: How bad will it be if it happens? Mitigation: How can you reduce the probability (and by how much)? Contingency: How can you reduce the impact (and by how much)? Reduction = mitigation x contingency Exposure = risk - reductionAfter you identify the above, the result will be what’s called exposure, which is the amount of risk you simply cannot avoid. Exposure