You have a small office in an industrial areA. You would like to analyze the risks your company faces. The office is in a pretty remote location; therefore, the possibility of arson is not entirely…

Question

Options

• AThe risk of fire is the threat of fire multiplied by the chance that the fire may occur and the consequences
• BThe threat of fire is the risk of fire multiplied by the chance that the fire may occur and the consequences

• A
  73% (19)
• B
  27% (7)

Explanation

Option A is correct because in risk management, risk is the broader calculated measure that combines a threat with the likelihood of it occurring and the potential consequences - expressed as: Risk = Threat × Probability × Consequences. In this scenario, arson is the threat (a potential harmful agent), but the actual risk of fire depends on how likely that arson is to happen and how damaging it would be if it did.

Option B is wrong because it inverts the relationship, treating threat as the product of risk, probability, and consequences - but threat is an input to the risk equation, not the output. Threat alone doesn't account for likelihood or impact, so it cannot be derived by multiplying those factors together.

Memory tip: Think of risk as the "full picture" and threat as just one piece of it. Use the acronym R = T × P × C (Risk = Threat × Probability × Consequences) - risk is always the result, never the starting factor.

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