1 What do we mean by risk?
There are different definitions of risk. The dictionary definition is:
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.
An uncertain event or set of circumstances that, should it occur, will have an effect on achievement of one or more objectives.
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.