Risk is generally defined as the potential for loss or harm, and it can be measured in a variety of ways. Probability and impact are two common factors used to measure risk, and they can be used independently or in combination with other factors to assess the level of risk associated with a particular situation. Probability is a measure of the likelihood that a particular event or outcome will occur, while impact is a measure of the potential consequences of the event or outcome. In general, risk can be defined by either probability or impact, depending on the context and the factors being considered. For example, a situation may be considered high-risk if it has a high probability of occurring or if it has the potential for significant negative consequences, regardless of the likelihood of it occurring.
“Truth be known, forecasts aren’t worth very much, and most people who make them don’t make money in the markets.. This is because nothing is certain and when one overlays the probabilities of all of the various things that affect the future in order to make a forecast, one gets a wide array of possibilities with varying probabilities, not one highly probable outcome.” – Ray Dalio