Estimating Probability Using a Quantitative Analysis
Another approach to estimating probability and impact is a quantitative analysis. A quantitative method uses a numeric scale, usually from 0 to 1, to measure the probability of an event occurring, where 0 means an event would not occur and 1 means it will occur. The impact is measured in the same way, where 0 means no impact and 1 means the maximum impact possible.
Using the parachute example, the risk of an FAA licensed dual-parachute (a back-up chute is required) failure as determined from US FAA data collected in 2005 is .000016 (35 incidents from over 2,000,000 jumps), but since death is the result, the impact of a dual-parachutes failure is 1.0.
Assessing Risk Exposure
Risk exposure is a combination of the probability and the impact of the risk. The project manager is responsible for determining the risk exposure, using probability and impact estimates and the following matrix tool. Risk exposure has more than one dimension, such as cost, schedule, quality, and customer satisfaction, that should be considered.
In this matrix, the risk decreases as you move from right to left, or top to bottom. To illustrate, in the parachute example, low probability and high impact results in a medium risk exposure.