categorizes all risks in terms of their impact—how much damage they would cause if they materialize—and their likelihood—how likely they are to occur. These are combined to assess each risk’s severity. It is easiest to consider the impact in financial terms: how much money would be lost if the risk materializes? Then the likelihood can be modeled as a probability between 0 (impossible) and 1 (certain). Severity is then the impact multiplied by the probability, which gives you an estimate of the severity of the risk in terms of an amount of money. This allows you to make a very simple
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