How does the FAIR model classify risks?

The FAIR model, which stands for Factor Analysis of Information Risk, classifies risks by assessing both the frequency of loss events and the potential impact of those events. This approach provides a comprehensive understanding of risk as it goes beyond merely identifying valuable assets or compliance criteria.

In the FAIR model, frequency refers to how often a specific loss event is expected to occur, while potential impact illustrates the magnitude of the loss if that event happens. By analyzing these two dimensions, organizations can quantify risks in financial terms, enabling a clearer comparison of various risks and aiding in informed decision-making about risk management strategies.

This risk classification allows organizations to prioritize their risk management efforts based on the severity and likelihood of potential threats, which is essential for allocating resources effectively and implementing appropriate controls. In contrast, other choices either oversimplify the complexity of risk assessment or focus too narrowly on compliance or categorization without providing a nuanced understanding of risk dynamics.