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PO5.2 ANALYZE LIKELIHOOD / IMPACT
Analyze and define the likelihood and impact of each identified risk.


Understanding the likelihood and impact of risks will help form the basis for resource allocation and ensure appropriate responses and controls are established. Management should understand the risks that are predominant in the entity's industry and those risks that are likely due to past violations by the entity.

To understand the true impact of risk, the entity must take into consideration that fines or penalties may multiply with each recurring event.
Standards & Guidance
Core Practices
    PO5.2.101
  • Estimate the likelihood that an event will occur.
    PO5.2.102
  • Consider industry history and trends when estimating likelihood and impact.
    PO5.2.103
  • Consider organizational history and trends when estimating likelihood and impact.
    PO5.2.104
  • Consider organizational geography when estimating likelihood and impact.
    PO5.2.105
  • When estimating likelihood of event occurrence, obtain input from personnel in the field and those with substantial authority over related business processes and practices.
    PO5.2.106
  • Estimate the impact of each risk.
Additional Practices
    PO5.2.201
  • When estimating likelihood of event occurrence, take near-term and long-term horizon into account.
    PO5.2.202
  • When estimating likelihood of event occurrence, consider how events correlate (if one event occurs, how will it increase or decrease the likelihood of another event occurring).
    PO5.2.203
  • When estimating impact, quantify it in financial terms.
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