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

The highest level of risk to a project is determined by evaluating both the likelihood of failure and the potential cost of impact. This can be quantitatively assessed using a risk calculation formula, often represented as Risk = Likelihood × Impact.

In the case of option B, with a likelihood of failure at 10% and a potential impact cost of $500,000, the associated risk is calculated as follows:

Risk = 10% (0.1) × $500,000 = $50,000.

This value indicates that, if the project were to face failure, the expected loss would amount to $50,000 based on the likelihood and cost impact.

When comparing this to the other options, it becomes clear why B represents the highest risk level. The first option presents a very low likelihood (1%) but a high impact ($1 million), resulting in a potential risk value of just $10,000. The other options yield risks of $30,000 and $25,000 respectively.

Thus, B's combination of a moderate likelihood of failure coupled with a significant potential impact generates the greatest risk value, indicating that it poses the highest threat to the project's success.