The purpose of risk management is prevention of problems that may substantially affect project outcomes. The aim is to determine the severity of the problem, identify the risk bearer and prepare measures to reduce or completely remove the risk.
Value of risk (R) is determined as the product of the probability of its occurrence (P) and the size of is impact (D) on the project.
R = P x D
In practice, the two approaches are common in expressing the likelihood and impact. One is numeric and the other is verbal.
In practical terms, it is better if the team involved in the analysis decides to implement the verbal approach. For example, the ranges are expressed from low probability and low impact to high probability and high impact. From the matrix presented in this way, one then determines impact of the risk and prepares the necessary measures in proportion to its size.
Issues that will be valued as highly serious with the possibility of a fatal impact on the project must be fully removed or managed through appropriate measures to such an extent that they do not adversely affect the project. The other risks are continuously monitored and re-evaluated in case of prolonged duration of the project.