What Is Risk Criteria? – Critical Information For You To Know
Risk Criteria is a method for prioritizing risks and identifying the appropriate response options. It is a Risk Management tool used to identify, quantify and prioritize risks. It is often categorized as either qualitative or quantitative. It includes the likelihood of something happening (e.g., high, medium, low). At the same time, Quantitative Risk Criteria describes the potential impact on an organization if it does happen (e.g., $1 million, $10 million).
It consists of three steps: Risk identification, Risk Analysis, and Risk evaluation.
Step one: Risk Identification
- Identify the potential risks to your organization’s objectives which could be internal or external
- List them by likelihood (low, medium, high) and consequence (minor, major)
Step two: Risk Analysis: Risk analysis is the process of evaluating risks by considering their likelihood and severity to determine which are most important for the organization to address. Risk criteria assign values between one (lowest) and five (highest) for each of these two categories and then combine them to come up with a total risk value.
Step three: Risk Management: It is an organization’s plan for dealing with different types of risks. It includes both preventative measures and how you will react when things go wrong. Risk management is a process that has many different components, such as Risk Analysis and Risk Criteria.