Risk Impact

Overview

Risk impact is the magnitude and type of consequence that could result if a risk event occurs, including financial, operational, customer, legal, privacy, security, safety, or reputational harm.

Risk Impact is closely connected to Risk Likelihood, Risk Matrix, and Incident Severity. It differs from likelihood, which estimates the chance or frequency of occurrence; both dimensions are commonly combined but should retain their separate assumptions.

Operational implementation should define impact scales with measurable examples, consider direct and secondary effects, include affected people and critical services, estimate ranges, document uncertainty, and reassess after incidents or business changes.

The principal failure modes include single-number false precision, ignoring nonfinancial harm, inconsistent scales, double counting, optimistic recovery assumptions, and failure to consider correlated or systemic effects.

Useful measures include impact estimates versus actual losses, high-impact risks, model calibration, customer harm, downtime, and accepted exposure by impact tier.

Operationally, teams should define impact scales with measurable examples, consider direct and secondary effects, include affected people and critical services, and estimate ranges. Key risks include single-number false precision, ignoring nonfinancial harm, inconsistent scales, and double counting.

For Risk Impact, the assessment should evaluate the magnitude and type of consequence that could result if a risk event occurs, including financial, operational, customer, legal, privacy, security, safety, or reputational harm. The assessment record should separate observed evidence supporting the magnitude and type of consequence that could result if a risk event occurs, including financial, operational, customer, legal, privacy, security, safety, or reputational harm from assumptions, state the time horizon and existing controls, and identify who owns any remaining exposure. Monitoring should test whether the conditions described in the magnitude and type of consequence that could result if a risk event occurs, including financial, operational, customer, legal, privacy, security, safety, or reputational harm have changed enough to require a new rating, treatment, or approval.