What does likelihood measure in risk management?

In risk management, likelihood specifically measures the probability or chance that a particular risk event will occur. This concept is crucial as it helps organizations prioritize risks by evaluating how often a risk is expected to happen. Understanding the likelihood of various risks allows for more informed decision-making regarding resource allocation and risk mitigation strategies.

When assessing risks, organizations often categorize events based on their likelihood to help them focus on the most probable threats that could impact their operations. This measurement becomes part of a broader risk assessment process, which also considers the potential impact of these events, but understanding the likelihood is foundational for effective risk management.