How are the parameters of risk, probability, and impact determined?

Consider questions such as:

How big is the risk?

What exactly is being exposed to the risk?

Can this be considered an acceptable risk?

What alternatives are there?

Will alternatives invoke additional risks?

As it is impossible to be completely certain of the impact or likelihood of many events, these events are estimated using a combination of historical data, knowledge of the event, and experience and judgment. Tools such as simulation, decision trees, or calculating a monetary value are used. Risk can be calculated by structured (associated with data) and unstructured (focus on judgment and experience) methods. Regardless of the method used, two elements must always be considered:

The probability of such an event occurring

The resulting impact if the event occurs