Question 1

Why should likelihood and impact be assessed separately?

Accepted Answer

Because conflating them into a single intuitive judgment tends to systematically underweight rare but severe risks and overweight common but minor ones.

Question 2

Why do people often dismiss rare but severe risks?

Accepted Answer

Because low likelihood makes a risk feel unimportant, even when its potential severity, if it did occur, would warrant significant concern.

Question 3

Why do familiar risks tend to get overweighted?

Accepted Answer

Because vividness and familiarity distort intuitive likelihood estimates, making a memorable but statistically less common risk feel more significant than its actual probability warrants.

Question 4

How can I assess risk more systematically in a real decision?

Accepted Answer

Rate likelihood and impact as two separate dimensions, seek actual data on likelihood where available, and map the downstream consequences of a given risk materializing.

Risk Assessment in Decisions: Weighing Likelihood and Impact