The risk evaluation process requires a mathematical approach and considerable data on the past losses. Comment.

The risk measurement process requires a mathematical approach and considerable data on the past losses. The data available from the concern itself may not be adequate enough to lend itself amenable to analytical exercise. Hence, it becomes necessary to resort to data on industry basis, at national and sometimes even at international level. Risk evaluation includes the determination of the: Probability or chances that losses will occur. Impact the losses would have upon the financial affairs of the firm should they occur. Ability to predict the losses that will actually occur during the budget period. There are various statistical methods of quantifying risks. But the statistical methods are too technical and the risk manager then relies on his judgment. Risks are classified as modest, medium, severe etc. In either event, a 'risk matrix' can be prepared which essentially classifies the risks according to their frequency and severity.