Risk management
Risk management

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Risk management

1 What do we mean by risk?

There are different definitions of risk. The dictionary definition is:

A situation involving exposure to danger.

However, there are other definitions of risk:

A situation involving exposure to danger, the possibility that something unpleasant or unwelcome will happen, a person or thing regarded as a threat or likely source of danger, a possibility of harm or damage against which something is insured, a person or thing regarded as likely to turn out well or badly in a particular context or respect, the possibility of financial loss.

Risk: effect of uncertainty on objectives.

  • Note 1 to entry: An effect is a deviation from the expected. It can be positive, negative or both, and can address, create or result in opportunities and threats.
  • Note 2 to entry: Objectives can have different aspects and categories, and can be applied at different levels.
  • Note 3 to entry: Risk is usually expressed in terms of risk sources, potential events, their consequences and their likelihood.
ISO 31000 (2018)

An uncertain event or set of circumstances that, should it occur, will have an effect on achievement of one or more objectives.

Association of Project Managers (APM)

As you study this course you will find that there are differences – often quite subtle – in the way that individual organisations define various risks. Such differences have become less common in recent years with the adoption of internationally recognised standards for risk management – particularly those standards laid down by the International Organization for Standardization (ISO) in its ‘ISO 31000’ directive and those laid down by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Watch Video 1 to learn from the experts what ‘risk’ means.

Download this video clip.Video player: Video 1 What does ‘risk’ mean?
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Transcript: Video 1 What does ‘risk’ mean?

SPEAKER 1:
Ultimately, risk is all around uncertainty. So any risk, it can be threat. It can be opportunity. But ultimately, it's a situation where you don't have full certainty of what the outcome is going to be.
SPEAKER 2:
Risk is a word that gets used a lot by a lot of people in a lot of different contexts. You hear about the risky pass in football or rugby. You hear about the risky investment that people make. For me, in a business context, risk has two key aspects to it. One- it's something that is uncertain. And secondly, it's something that could affect your objectives, the end point that you're trying to achieve.
SPEAKER 3:
In essence, we've been doing it since the very early years we were born in absolutely everything we do, whether it's asking that person out to a school disco, or whether it's getting to work on time, or trying to take a shortcut, or whatever it might be. Everything has a risk. And generally, we take risks so we can try and maximise or take advantage of some opportunity somewhere.

End transcript: Video 1 What does ‘risk’ mean?
Video 1 What does ‘risk’ mean?
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