Understanding and assessing the scale of risk

In this lesson

1. 0:00 Introduction to risk assessment
2. 0:36 Probability and impact framework
3. 2:02 Expected values and quantification
4. 3:02 Using accounting ratios for risk
5. 5:04 Short-term liquidity and solvency
6. 6:08 Sensitivity analysis technique
7. 7:17 Risk mapping and heat maps
8. 8:08 Why eliminating risk is impractical
9. 9:04 Correlation between risks
10. 11:05 Risk assessment process summary

About this lesson

You'll explore several practical methods for evaluating risk scale. The most common approach combines probability and impact to give you a clear sense of how serious each risk is likely to be. You'll also learn how scenario planning helps you stress-test your business model against plausible future conditions, and how expected values can quantify risk numerically when you have the data available. The lesson covers how accounting ratios reveal financial risk, including gearing ratios that show your long-term solvency and liquidity ratios that indicate your ability to pay bills in the short term. You'll discover how to interpret these ratios meaningfully by comparing them to previous periods or competitors, rather than judging them in isolation. Sensitivity analysis is introduced as a tool to identify which variables your business is most exposed to, so you can prioritise your risk management efforts accordingly. Finally, you'll learn how to map and visualise risks using a heat map, and why the goal isn't to eliminate risk entirely but to reduce it to a level that's as low as reasonably practicable. The lesson emphasises the importance of considering how risks interact with each other—some compound and amplify danger, while others may offset one another—before deciding what action to take. This holistic view ensures your risk management strategy is both realistic and cost-effective.

Duration: 12m