Jeff, a key stakeholder in your project, wants to know how the risk exposure for the risk events is calculated during quantitative risk analysis.
He is worried about the risk exposure which is too low for the events surrounding his project requirements.
How is the risk exposure calculated?
Click on the arrows to vote for the correct answer
A. B. C. D.C.
Sure, I'd be happy to provide a detailed explanation of how risk exposure is calculated during quantitative risk analysis.
Quantitative risk analysis is the process of assessing the likelihood and potential impact of identified risks to determine their overall risk exposure. Risk exposure is defined as the amount of potential loss that an organization may experience due to a particular risk event. In other words, it represents the financial impact of a risk event on the organization.
To calculate the risk exposure, we need to consider two key factors: the probability of the risk event occurring and the impact it would have if it did occur. The probability is a measure of how likely the risk event is to occur, while the impact is a measure of the magnitude of the consequences that would result if the risk event were to occur.
The probability of a risk event is typically expressed as a percentage, ranging from 0% (no chance of occurrence) to 100% (certain to occur). The impact of a risk event is typically expressed in terms of a monetary value or a qualitative rating, such as low, medium, or high.
To calculate the risk exposure, we multiply the probability of the risk event by its impact. For example, if the probability of a risk event occurring is 25% and the impact if it were to occur is $100,000, then the risk exposure would be calculated as:
Risk exposure = Probability x Impact Risk exposure = 0.25 x $100,000 Risk exposure = $25,000
This means that the organization would be exposed to a potential loss of $25,000 if the risk event were to occur.
It's important to note that risk exposure is not an absolute measure, but rather a relative measure of the potential impact of a risk event. The actual impact of a risk event may be higher or lower than the estimated risk exposure, depending on a number of factors, such as the effectiveness of risk mitigation measures, the speed of response, and the ability to recover from the impact.
In summary, the correct answer to the question is option C: The probability of a risk event times the impact of a risk event determines the true risk exposure.