In ORM, what does "severity" measure?

In the context of Operational Risk Management (ORM), "severity" specifically measures the potential impact of a risk if it occurs. This concept is integral to assessing risks because it helps organizations prioritize which risks need to be addressed based on their potential consequences. Understanding severity allows decision-makers to evaluate how harmful an event could be, enabling them to allocate resources effectively and implement necessary mitigation strategies.

While factors such as the level of training required, the likelihood of an event happening, and the costs associated with implementing risk controls are important considerations in the ORM process, they do not directly address the concept of severity. Instead, they each play a role in a comprehensive risk management strategy, but they focus on different aspects of risk evaluation and mitigation.