Once the potential risks have been initially identified, an assessment is made for every identified risk.

The likelihood of a risk event occurring, and the potential impact of that risk on cost and schedule are assessed at this stage. This assessment is initially made by estimating these effects and assigning an order of magnitude scale value for likelihood and severity. Projects will often utilize the following numerical scale when categorizing risks, and each risk will be ranked in respect to its ‘Likelihood’ and it’s ‘Impact’ (i.e. its seriousness or consequence) of occurrence. The project Risk Likelihood Scale is categorised as follows:

Category 1 = Very Low Chance (i.e. say a 1 in 20,000 chance)

Category 2 = Low Chance (i.e. say a 1 in 2,000 chance)

Category 3 = Average Chance (i.e. say a 1 in 200 chance)

Category 4 = High Chance (i.e. say a 1 in 20 chance)

Category 5 = Very High Chance (i.e. say a 1 in 2 chance)

The project Risk Consequence (Impact) Scale is categorised as follows:

Category 1 = Very Low Cost / Time (i.e. a negligible cost, and negligible impact to elements of the programme)

Category 2 = Low Cost / Time Impact (i.e. a > 0.1% project value, or minor impact to elements of the programme)

Category 3 = Average Cost / Time Impact (i.e. a > 1.0% project value, or some impact to programme)

Category 4 = High Cost / Time Impact (i.e. a > 10% project value, or probable lateness to Railway Opening)

Category 5 = Very High Cost / Time Impact (i.e. a > 100% project value, or definite lateness to project completion)

Using the above ratings for likelihood and impact, you can then determine a current grading for each risk that in turn provides a measure of the project risk exposure at the time of the evaluation.

It can be stated that: Risk = Likelihood of Occurrence of Risk x Impact of Risk

The project Control Strategy Cost (Impact) Scale is categorised as follows:

Low i.e. < 0.001 project value; a negligible cost to implement risk control measures

Med i.e. a > 0.001% project value to implement risk control measures

High i.e. a > 0.01% project value to implement risk control measures