Which of the following risk scenarios indicates the highest level of risk to a project?

To determine the highest level of risk to a project, it is important to assess both the likelihood of failure and the potential cost of impact. The concept of risk can be quantified as the product of these two factors.

In this scenario, option B has a likelihood of failure at 10% and a potential cost associated with that failure of $500,000. To quantify the risk corresponding to this scenario, you can calculate it as follows:

Risk = Likelihood of failure (as a decimal) x Potential cost of impact

Risk = 0.10 x $500,000 = $50,000

In comparison, let's analyze the risk in the other options using the same calculation:

• The first option indicates a likelihood of 1% with a potential impact of $1 million, leading to a calculated risk of $10,000 (0.01 x $1,000,000).

• The third option has a likelihood of 20% and a potential impact of $150,000, resulting in a risk of $30,000 (0.20 x $150,000).

• The last option shows a 5% likelihood with a cost impact of $500,000, resulting in a risk of $25,000