Page 39 - EBOOK RISK MANAGEMENT

the probabilities of certain outcomes or how likely the event still can happen. The

best example for understanding probability is flipping a coin when there are two
possible outcomes, whether heads or tails. There are no other possibilities exist.

Probability of an outcomes will help risk manager in evaluate each risk. There are

two types of probabilities which is mutually exclusive events and compound or joint
outcomes.

4.3.1 Mutually Exclusive Events

Mutually exclusive is an events that cannot occur at the same time. As an example,
event A and event B can occur at any one incident but cannot occur together at

the same time and both of the events do not show any outcomes. A factory cannot

both burn and not burn at the same time. Probability of the factory will either burn
or not burn is 1 in mutually exclusive events, because one of the events is certain

to occur. According to the figure below, there are two separate circle which shows
that no overlap between both events.

EVENT A EVENT B

Factory burn Factory not
burn
(0.55)
(0.45)

If the probability of a factory on fire is 0.55, the probability of factory will not catch
fire is 1 - 0.55 = 0.45. Thus, if two events are mutually exclusive, then the probability

of either occurring is:

( ) = () + ()

Another example is fire occuring at factory during three different shifts.

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