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| Image gathered from risk-lab.com |
From: Palisade.com
Risk analysis is systematic use of available information to determine how often specified events may occur and the magnitude of their consequences.
Risks are typically defined as negative events, such as losing money on a venture or a storm creating large insurance claims. However, the process of risk analysis can also uncover potential positive outcomes. By exploring the full space of possible outcomes for a given situation, a good risk analysis can both identify pitfalls and uncover new opportunities.
Risk analysis can be performed qualitatively or quantitatively. Qualitative risk analysis generally involves assessing a situation by instinct or “gut feel,” and is characterized by statements like, “That seems too risky” or “We’ll probably get a good return on this.” Quantitative risk analysis attempts to assign numeric values to risks, either by using empirical data or by quantifying qualitative assessments.
Risks are typically defined as negative events, such as losing money on a venture or a storm creating large insurance claims. However, the process of risk analysis can also uncover potential positive outcomes. By exploring the full space of possible outcomes for a given situation, a good risk analysis can both identify pitfalls and uncover new opportunities.
Risk analysis can be performed qualitatively or quantitatively. Qualitative risk analysis generally involves assessing a situation by instinct or “gut feel,” and is characterized by statements like, “That seems too risky” or “We’ll probably get a good return on this.” Quantitative risk analysis attempts to assign numeric values to risks, either by using empirical data or by quantifying qualitative assessments.
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