Business Finance Homework Help

Risk management is an important function in every organization. Companies that take projects with different complex and ambitions need to execute the projects successfully in an uncertain and risky environment. As responsible risk assessment managers or owners, we need to be aware of these risks. But the question is should we try to address every risk that a project might face? To know this companies use risk impact and probability charts to help us. Using a Risk impact/ probability chart, we can prioritize risks. We can also find which risk is going to turn into an issue and which risk is yet to be an issue. The Risk Impact/Probability Chart provides a framework that helps us decide which risks need your attention.
For Creating a Risk impact/probability chart, we need to calculate the risk score for each risk. To calculate the risk score, we need to find the impact of that risk and the likelihood of that risk to occur.
For assessing the risk for my chosen organization, I will first create a risk calculator sheet and calculate the range of the impact if the risk occurs. After calculating the range of the impact, I will select the impact that will happen to the company if the risk occurs. I will also create a table with levels of likelihood.
After creating above mentioned chart, I will calculate the risk score, by using the formula – Impact of risk * likelihood of that risk to occur.
Then, I will create a risk impact and probability chart. The x-axis in the chart will represent, the impact of risk (low to high), whereas the y-axis will represent, the probability of risk occurrence (high to low) and according to the risk score calculated earlier, I will map the risks to the risk impact and probability chart.
Using the risk impact and probability chart, one can figure out which risk is going to be an issue so that we can work on them. The top left corner elements of the chart will be the risk with a high probability of occurrence and less impact, The top right corner risk of the chart will be the risk with a high probability of occurrence and impact. The risk to the bottom left corner of the chart will be the risk with a low probability of occurrence and low impact, whereas the risk at the bottom right corner will be a risk with a high impact and low probability of occurrence.