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#Basing reaction on outcome severity vs risk probability how to

Conversely, if evidence risk is ‘Medium/Low’ or ‘Medium/High’ (i.e.

When this is the case, enterprises and investors may not find useful to consider these other four risks separately, as their assessment depends on sufficient data availability.

If evidence risk is classified as ‘High’, then it is likely that other data-related risks – drop-off, execution, unexpected impact and efficiency risks – will also be classified as ‘High’.

the probability of insufficient high-quality impact data) by considering the availability of impact data across the other dimensions (‘ What’, ‘ Who’, ‘ How much’ and ‘ Contribution’). It is often practical to start with assessing evidence risk (i.e. However, it should be regularly reviewed to ensure it remains under the same classification.ģ. If a risk is classified as ‘Low’, then the risk would not be considered material. Enterprises and investors need to conduct a risk assessment for each outcome that they deliver.Ģ. Each outcome will be exposed to one or more risk(s), although not all of them will be material. However, the following guidelines may prove useful during the assessment process:ġ.

#Basing reaction on outcome severity vs risk probability how to

A very likely and severe risk would be classified as ‘High’, whereas a very unlikely and not severe risk would be classified as ‘Low’.ĭeciding how to rank risks – and which risks to act upon – will be organisation-specific. The consequences for the stakeholder should the risk materialiseĮnterprises and investors can classify these risks into ‘Low’, ‘Medium’ or ‘High’, as per the diagram below.To assess impact risks, enterprises and investors need to consider: The remaining sections provide enterprises and investors with guidance on how they can implement the three ‘ Risk’ categories. This process enables enterprises and investors to maximise their impact on people and planet. Mitigation strategy: The mitigation strategy to reduce the level of impact riskīy collecting data across these categories, enterprises and investors can gain a nuanced understanding of the potential risks and actively work towards decreasing their likelihood and severity.Level of impact risk: The likelihood and severity of the impact risk.Type of impact risk: Nine types of impact risks that may undermine the delivery of the outcome.The three data categories under the ‘ Risk’ impact dimension provide enterprises and investors with a roadmap for assessing and mitigating impact risks. Neglecting an impact risk may jeopardise the outcomes that people or planet experience therefore enterprises and investors need to consider these separately from financial risks. Conversely, if the enterprise (or investor) would have also considered impact risks, the assessment may have pushed the management team to explore other alternatives (such as a cross-subsidy model) to prevent pricing out those who are likely to benefit the most from the product or service.

A financial risk assessment may point to raising prices to increase profitability, with clear implications for customers at the bottom of the economic pyramid. While financial risk assessments may capture impact risks, this is not always the case. When enterprises and investors set financial goals, they always face the risk of not achieving them.