Which term refers to a type of risk analysis that uses numerical values to predict likelihood and severity?

Which term refers to a type of risk analysis that uses numerical values to predict likelihood and severity?

• A. Quantitative risk analysis
• B. Risk Analysis
• C. Qualitative risk analysis
• D. Reduction

Answer: (A)

This item tests the distinction between risk analyses that use numbers to estimate likelihood and impact. Quantitative risk analysis translates probabilities and consequences into numerical values, allowing you to calculate expected losses, rank risks, and model uncertainty with statistics or simulations. For example, if a risk has a 5% chance of occurring and would cost $200,000 if it happens, the expected loss is $10,000. Techniques like Monte Carlo simulations or probability distributions turn input data into a distribution of possible outcomes, helping with informed decision making under uncertainty. In contrast, qualitative risk analysis relies on descriptive categories (like low, medium, high) rather than precise numbers, which is less precise for calculations. The broader term “risk analysis” is too general, and “reduction” refers to mitigation actions rather than a type of analysis.

This item tests the distinction between risk analyses that use numbers to estimate likelihood and impact. Quantitative risk analysis translates probabilities and consequences into numerical values, allowing you to calculate expected losses, rank risks, and model uncertainty with statistics or simulations. For example, if a risk has a 5% chance of occurring and would cost $200,000 if it happens, the expected loss is $10,000. Techniques like Monte Carlo simulations or probability distributions turn input data into a distribution of possible outcomes, helping with informed decision making under uncertainty.

In contrast, qualitative risk analysis relies on descriptive categories (like low, medium, high) rather than precise numbers, which is less precise for calculations. The broader term “risk analysis” is too general, and “reduction” refers to mitigation actions rather than a type of analysis.