In risk management, which statement best describes likelihood and impact?

• A. Likelihood refers to probability of occurrence
• B. Impact refers to the budget
• C. Likelihood and impact are unrelated
• D. Likelihood refers to probability of occurrence, and impact refers to consequences if it occurs

Answer: (D)

In risk management, likelihood is the probability that a risk event will occur, while impact is the consequences if it does occur. Together these two dimensions define risk by describing how often something could happen and how severe the outcome would be, which is why many systems use both to prioritize responses (often by combining them into a risk rating). The correct statement captures this relationship: likelihood equals probability of occurrence, and impact equals the consequences if it happens. The other ideas miss essential aspects—impact is not simply a budget figure, they are not unrelated, and likelihood alone does not describe risk without considering the potential consequences.