Risk evaluation is the second step in the risk management process, following risk analysis.

Once a list of potential hazards has been created, evaluation answers the question: 'How big is each risk?' This allows a company to focus its limited resources on the most significant threats.

The standard method for evaluation involves assessing two factors for each risk: 1.

**Probability:** How likely is it that this event will occur? (e.

g.

, low, medium, high).

2.

**Severity:** If it does occur, what will the consequences be? (e.

g.

, minor injury, major vehicle damage, fatality).

A risk score is often calculated using the formula: **Risk = Probability x Severity**.

The risks with the highest scores are the ones that must be addressed first.

For example, a minor scratch on a vehicle might have a high probability but a very low severity, resulting in a low overall risk score.

A brake failure has a very low probability but a catastrophic severity, resulting in a very high risk score that demands immediate attention.

This prioritization is essential for effective risk reduction.