What does identifying the probability and impact of a risk involve?

Identifying the probability and impact of a risk involves assessing the potential occurrence and consequences of that risk. This process is essential in risk management as it allows organizations to understand how likely a risk is to happen (probability) and what the consequences would be if it does occur (impact). This dual assessment enables businesses to prioritize risks based on their severity and likelihood, guiding them in developing strategies to mitigate or respond to those risks effectively. Evaluating customer satisfaction, estimating financial health, and reviewing past business performances do not directly relate to the systematic analysis of risks; instead, they focus on different aspects of business operations. Thus, the correct answer emphasizes the core activity of risk evaluation in the context of risk management.