Risk is often represented as a combination of which two components in risk management frameworks?

Risk is fundamentally defined in risk management frameworks as a function of two critical components: impact and likelihood. This framework provides a structured approach to assessing and quantifying risk.

Impact refers to the consequences or the potential harm that could result from a risk event. This may encompass a range of effects, including financial loss, reputational damage, operational disruption, and legal ramifications. By evaluating the impact, organizations can understand the severity of the consequences should a risk materialize.

Likelihood, on the other hand, reflects the probability of the risk event occurring. This is an essential element because not all risks have the same chance of occurrence. By assessing likelihood, organizations can prioritize their attention and resources towards risks that are not only severe in impact but also have a higher probability of occurring.

When combining these two components, organizations can gain a comprehensive view of risk that enables more informed decision-making and resource allocation. This combination also facilitates risk comparisons across different scenarios, allowing for a more strategic approach to risk management.

In the context of the other options, while they may relate to different aspects of risk management, they do not encapsulate the foundational components as effectively as impact and likelihood do. Duration and severity refer to aspects of risk events but lack the essential probabilistic nature that likelihood