One large loss token and a smaller weighted-average marker on a desk. Original AI-generated artwork produced for GreenCalc; not a measured diagram or empirical data display.
A weighted mean is not the largest possible loss
Suppose a hypothetical failure has probability 12% and causes a loss of 1,000 units when it occurs. If the complementary outcome has zero loss, expected loss is 0.12×1,000 = 120 units. The scenario's realized loss is either zero or 1,000, not necessarily 120.
Keep three quantities separate
The failure probability describes how likely the event is under the model. The loss magnitude describes its consequence. Expected loss combines them into an average. Worst-case loss in this simple two-outcome model is 1,000 units, while the standard deviation is 1,000√(0.12×0.88), about 324.96 units. These quantities should retain distinct labels.
A different payoff model needs different inputs
If failure can cause several amounts, or success produces a benefit, the two-outcome zero-complement model is incomplete. Expected loss alone does not include potential profit, timing, financing needs or an individual's tolerance for large adverse outcomes. A precise multiplication does not validate a guessed event probability.
Use the tool for a defined scenario
The Risk Calculator implements this probability-times-loss interpretation and reports the assumed complement. For multiple discrete net outcomes, use the existing Expected Value Calculator. Read the probability–impact comparison before ranking alternatives by one number. This is educational scenario arithmetic, not a personal investment recommendation or a complete assessment of an operational risk.
Check the model behind your result
Use the Risk Calculator for the supported calculation and review its stated assumptions before interpreting the output. Find related tools in the Statistics category, or browse the GreenCalc homepage for other calculation topics.
By GreenCalc Editorial Team · Updated 2026-10-26