What does 'impact of a risk' relate to in risk assessment?

The impact of a risk refers specifically to the effect that occurs as a result of a risk materializing. In risk assessment, understanding this impact is crucial as it helps organizations evaluate how a specific risk could affect project objectives, resources, timelines, and overall business goals.

When assessing risks, organizations aim to quantify and qualify the potential consequences of risks, which informs their priorities and informs strategic responses to mitigate those risks effectively. A comprehensive analysis of the impact aids in decision-making when it comes to whether to accept, transfer, mitigate, or avoid the risk altogether.

The other options, while related to risk management, do not directly define the impact of a risk. For example, costs associated with mitigation examine financial implications rather than the direct effect of risk occurrence. Similarly, likelihood deals with the probability of risk happening, while the time frame focuses on how long it will take to resolve the risk, both of which are important elements of risk assessment but do not address the consequence directly.