Risk for any uncertain event or condition is essentially a function of probability and impact. As the probability or impact increases, so does the possibility that one or more project objectives will be significantly affected. Risk assessment is commonly performed using qualitative risk analysis techniques such as Risk Probability and Impact Assessment. As the name of this technique suggests, it is used to assess the probability and impact of identified risks by assigning ratings on a relative scale expressed as high, medium, or low. It is also possible to use a cardinal scale and assign numeric values. The overall risk level is assigned by combining the probability and impact results. For example, the overall risk level for risk with low probability and high impact is considered to be medium. Because of potentially significant impact on the project objectives, high risks require urgent management attention, active involvement of key project stakeholders and aggressive risk response strategies. Medium risks require notification of key project stakeholders and determining specific actions to address the issues. Low risks require normal monitoring and response planning at the discretion of the project manager and the project team.
Assessment of the identified project risks can also be performed using quantitative risk analysis tools and techniques such as Sensitivity Analysis, Expected Monetary Value (EMV) Analysis, Decision Tree Analysis, Monte Carlo Analysis, and many others.