Which method is frequently used to determine the likelihood and impact of risks?

The correct answer is the method that employs a Risk Matrix Analysis to assess the likelihood and impact of various risks. This analytical tool allows organizations to visually represent risks by categorizing them based on two main criteria: the probability of their occurrence and the potential impact or severity of their effects on objectives.

By plotting risks on a matrix, stakeholders can easily identify which risks pose the greatest threat and prioritize them for mitigation efforts accordingly. The matrix typically consists of different levels of likelihood (e.g., rare, unlikely, possible, likely, certain) on one axis, and varying levels of impact (e.g., insignificant, minor, moderate, major, catastrophic) on the other. This systematic assessment aids in strategic planning and resource allocation when it comes to risk management.

In contrast, other methods such as Pareto Analysis focus on identifying the most significant factors contributing to a problem rather than assessing risk likelihood and impact directly. Cost-Benefit Analysis evaluates the economic feasibility of actions but doesn't inherently address risk parameters. Statistical Process Control is more centered on process improvement and quality control, and while it may relate to risk in terms of variability, it does not directly analyze risk likelihood and impact in the same context as Risk Matrix Analysis.