Rating The Level of Project Risk

Rating the likelihood and potential impact of project risks helps the Project Manager identify which risks to focus their efforts on and which ones to communicate to stakeholders.

A simple way to understand the importance of a risk is to assess:

  • Risk likelihood – how likely is the risk to happen?
  • Risk impact – if the risk were to occur what would be the overall impact on the project?

We can rate each of these to assess the importance of the risk. Each risk should be assessed:

  • Rate the likelihood of the risk happening on a scale of 1 to 5 (1= very unlikely, 5= very high likelihood)
  • Rate the impact of the risk if it happens on a scale of 1 to 5 (1= very low impact, 5 = very high impact)

Overall Risk Rating

The overall risk rating is calculated by multiplying the two together:

Likelihood of risk x Impact of risk = Overall risk rating (1 to 25)

Generally speaking, the Project Manager should focus most of their efforts on mitigating risks that score above 15.

They should keep an eye on risks in the range 10-15 to make sure that they aren’t going to increase in the foreseeable future. Risks scoring below 9 can probably be ignored for the large part as it is better to focus time on the higher risks.

Risks should be reviewed regularly, and the ratings increased if the likelihood or impact increases or decreased if the risk is being mitigated.

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