Risk Calculator

How This Risk Calculator Works

This tool estimates expected loss for two options. Risk is the probability of failure multiplied by the loss if failure occurs:

$$\text{risk} = \text{probability} \times \text{loss}$$

Compare the two results and prefer the option with the smaller expected loss when payoffs are similar. Related tools: Expected Value Calculator and Probability Calculator.

Example

Option A fails 15% of the time with an $800 loss, so risk is $0.15 \times 800 = \$120$. Option B fails 8% of the time with an $1,800 loss, so risk is $0.08 \times 1800 = \$144$. Option A has the lower expected loss.

What This Number Leaves Out

Expected loss ignores upside. If option B has a much higher return when it succeeds, you might still choose it. Pair this calculator with ROI or expected-value analysis before a final decision. For medical or exposure comparisons, use the Relative Risk Calculator instead of this financial expected-loss formula.

Rearranging the Formula

If you know risk and loss, probability of failure is $\text{risk} / \text{loss}$. If you know risk and probability, loss is $\text{risk} / \text{probability}$. The tool computes risk from probability and loss for two options at once.