Which type of event poses the most risk?

The type of event that poses the most risk is a high-likelihood, high-impact event. This classification indicates that there is a significant probability of the event occurring alongside the potential for substantial adverse consequences if it does happen. Organizations must prioritize these types of events in their risk management strategies because their frequency combined with their severity creates a compounded risk scenario that can have devastating effects on operational continuity, financial stability, and overall safety.

When assessing risk, both dimensions—likelihood and impact—are crucial. High likelihood means that the event is expected to occur often, increasing the chances of experiencing negative outcomes. High impact signifies that, when it occurs, the repercussions will likely be severe, impacting resources, personnel, and possibly leading to catastrophic losses. Therefore, this combination demands immediate attention and proactive measures to mitigate potential damage.

Events that are categorized as high-likelihood with low-impact, or low-likelihood with high or low impact, do not present the same level of urgency for risk management as a high-likelihood, high-impact event. While they can still pose risks, they are typically less critical or do not require the same level of resources or strategic focus.