In risk management, what does "likelihood" refer to?

In the context of risk management, "likelihood" specifically refers to the probability of a risk event occurring. This concept is crucial as it helps organizations assess how often a particular risk may happen, enabling them to prioritize risks based on their potential frequency. Understanding likelihood allows risk managers to better allocate resources towards mitigating risks that are not only severe but also highly probable.

Evaluating likelihood helps in creating a comprehensive risk profile, as it factors into the overall risk assessment process alongside the impact or severity of a risk event. By focusing on the probability aspect, organizations can develop more accurate risk response strategies and prepare adequate contingencies for high-likelihood scenarios, ensuring effective risk management practices.