What does the term "High Impact/Low Probability Analysis" refer to?

The term "High Impact/Low Probability Analysis" refers specifically to the assessment of events or outcomes that, while having a significant potential consequence or impact, are considered unlikely to occur. This analysis is crucial in risk management as it helps organizations prioritize their responses and resource allocation. By identifying risks that could have severe implications even though their probability of occurrence is low, organizations can develop strategies and contingency plans to mitigate the effects of these potential events.

This approach allows decision-makers to balance resources effectively, ensuring they are prepared for scenarios that could disrupt operations or lead to substantial harm, despite their low likelihood. It plays a vital role in sectors like national security, healthcare, and finance, where the stakes of failure are particularly high.

The focus on unlikely yet potentially catastrophic events underscores the importance of preparing for future contingencies that might otherwise be overlooked if only high-probability incidents were considered.