This study describes an analysis carried out within the European community project "ALARM" (Assessment of Landslide Risk and Mitigation in Mountain Areas, 2004) on landslide risk assessment in the municipality of Corvara in Badia, Italy. This mountainous area, located in the central Dolomites (Italian Alps), poses a significant landslide hazard to several man-made and natural objects. Three parameters for determining risk were analysed as an aid to preparedness and mitigation planning: event occurrence probability, elements at risk, and the vulnerability of these elements. Initially, a landslide hazard scenario was defined; this step was followed by the identification of the potential vulnerable elements, by the estimation of the expected physical effects, due to the occurrence of a damaging phenomenon, and by the analysis of social and economic features of the area. Finally, a potential risk scenario was defined, where the relationships between the event, its physical effects, and its economic consequences were investigated. People and public administrators with training and experience in local landsliding and slope processes were involved in each step of the analysis. A "cause-effect" correlation was applied, derived from the "dose-response" equation initially used in the biological sciences and then adapted by economists for the assessment of environmental risks. The relationship was analysed from a physical point of view and the cause (the natural event) was correlated to the physical effects, i.e. the aesthetic, functional, and structural damage. An economic evaluation of direct and indirect damage was carried out considering the assets in the affected area (i.e., tourist flows, goods, transport and the effect on other social and economic activities). This study shows the importance of indirect damage, which is as significant as direct damage. The total amount of direct damage was estimated in 8 913 000 €; on the contrary, indirect damage ranged considerably from 2 840 000 to 9 350 000 €, depending on the selected temporal scenario and the expected closing time of the potentially affected structures. The multi-disciplinary approach discussed in this study may assist local decision makers in determining the nature and magnitude of the expected losses due to a dangerous event, which can be anticipated in a given study area, during a specified time period. Besides, a preventive knowledge of the prospective physical effects and economic consequences may help local decision makers to choose the best prevention and mitigation options and to decide how to allocate resources properly, so that potential benefits are maximised at an acceptable cost.