What is the formula used to determine risk?

The correct answer is based on understanding how risk is quantified within the context of insurance and risk management. The formula for determining risk commonly involves evaluating both the likelihood of an event occurring, referred to as probability, and the potential impact or consequences of that event should it occur.

In this context, risk is often simplified to the formula that incorporates the idea of exposure to risk and how this exposure can be mitigated or reduced. Therefore, determining risk may involve taking the probability of an adverse event and adjusting that for any measures taken to reduce the impact of that risk.

While the other options present different elements associated with risk, they don't accurately capture the relationship central to how risk is calculated. In particular, subtracting reduction from probability reflects how risk can be managed or decreased through mitigation efforts, making it the most directly relevant formula in assessing overall risk in the context provided. This understanding emphasizes the proactive approach to risk management where organizations or individuals not only recognize potential risks but also take steps to reduce their impact.