Language

The techniques to rate risks are well established. However, the language they use can create problems.

Many organisations use qualitative definitions of likelihood and impact such as:

Likelihood Impact
Unlikely Small
Possible Moderate
Likely Severe
Very likely Catastrophic

However, research suggests that people understand the terms differently. In one study individuals interpreted the probability implied by the phrase  “Very Likely” to mean anything from 43% to 99%, and “Unlikely” to mean anything from 8% to 66%.

Consequently, it can be helpful to quantify the Likelihood and Impact of risks and outline the assumptions being made. See the Tatton Hill Academy Case Study, for example.

Sources of information

To determine the impact and likelihood of a risk, you could:
      • examine past records
      • draw on relevant experience
      • look at published literature on the risk
      • conduct market research
      • use statistical models
      • use experts in a particular area of risk to make judgements

Widening participation

It can be helpful to get different perspectives on the likelihood and impact of a risk across an organisation. These can then be averaged to come up with a single set of numbers.