How To Calculate Overall Risk Rating

Risk Rating Formula:

\[ \text{Overall Risk Score} = \text{Likelihood} \times \text{Impact} \]

Overall Risk Score:

Risk Rating:

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1. What Is Overall Risk Rating?

Overall Risk Rating is a quantitative method used to assess and prioritize risks by multiplying the likelihood of an event occurring by the impact it would have if it occurred. This approach helps organizations systematically evaluate and manage potential threats.

2. How Does The Calculator Work?

The calculator uses the fundamental risk assessment formula:

\[ \text{Overall Risk Score} = \text{Likelihood} \times \text{Impact} \]

Where:

Likelihood — Probability of risk occurrence (1-5 scale)
Impact — Severity of consequences if risk occurs (1-5 scale)
Risk Score — Product of likelihood and impact (1-25 scale)

Risk Rating Scale:

1-4: Low Risk (Green)
5-9: Medium Risk (Yellow)
10-16: High Risk (Orange)
17-25: Critical Risk (Red)

3. Importance Of Risk Assessment

Details: Proper risk assessment enables organizations to prioritize resources, implement effective controls, make informed decisions, and maintain business continuity in the face of potential threats.

4. Using The Calculator

Tips: Rate likelihood and impact on a scale of 1-5, where 1 represents very low/unlikely and 5 represents very high/certain. The calculator will automatically compute the overall risk score and assign the appropriate risk rating.

5. Frequently Asked Questions (FAQ)

Q1: What do the likelihood scores represent?
A: 1=Very Unlikely, 2=Unlikely, 3=Possible, 4=Likely, 5=Very Likely/Certain

Q2: How should impact be assessed?
A: 1=Negligible, 2=Minor, 3=Moderate, 4=Major, 5=Catastrophic

Q3: Can this method be used for all types of risks?
A: This is a general framework suitable for most risk types, but specialized industries may require additional factors or modified scales.

Q4: How often should risk assessments be updated?
A: Regular reviews are recommended - typically quarterly for dynamic environments or annually for stable operations, plus whenever significant changes occur.

Q5: What actions should follow risk assessment?
A: High and critical risks require immediate mitigation plans, medium risks need monitoring and controls, while low risks may be accepted with periodic review.