Risk likelihood refers to the probability or chance of a specific risk event occurring within a given timeframe. It is a crucial aspect of risk assessment and management, helping your organisation understand the potential frequency of negative events and their potential impact.
When evaluating risk likelihood, several factors are typically considered:
Historical data: Past occurrences of similar risks can provide insights into their likelihood of happening again in the future.
Expert judgement: Input from subject matter experts can help assess the likelihood based on their knowledge and experience in the relevant domain.
Environmental factors: External factors such as market conditions, regulatory changes, or technological advancements can influence the likelihood of certain risks.
Internal controls: The effectiveness of internal controls and risk mitigation measures can impact the likelihood of risks manifesting.
Risk likelihood is often expressed using qualitative terms such as "low," "medium," or "high," or quantitatively as a percentage or numerical scale (e.g., 1 to 5 in a risk matrix). Understanding risk likelihood allows your organisation to prioritise risks, allocate resources effectively, and implement targeted risk management strategies to mitigate any potential negative impacts.