What is meant by 'impact' in the context of risks?

In the context of risks, 'impact' refers to the extent of potential harm that could result from a risk event. This encompasses various types of consequences that may arise if a risk were to materialize, including damage to assets, injury to individuals, or disruption of business operations. Understanding the impact allows organizations to prioritize which risks require more attention based on how severely they could affect the company's objectives.

For example, if a risk event has a high impact, even a low likelihood of it occurring might necessitate proactive measures to mitigate that risk, since the potential consequences could be catastrophic. This determination is crucial for effective risk management, enabling organizations to allocate resources wisely and prepare adequately for potential adverse events.

The other choices touch on aspects of risk management but do not accurately capture the definition of 'impact.' Identifying the number of risks is about the breadth of risk assessment, potential financial costs focus on monetary aspects, and likelihood pertains to the probability of occurrence rather than the severity of the outcome.