Risk
Table of Contents:
Definition of Risk
Risk refers to the uncertainty or probability of potential harm, loss, or negative consequences arising from events, actions, or decisions.
It involves the chance of deviation from expected outcomes and encompasses factors that can impact objectives, assets, or well-being.
Risk assessment and management aim to identify, analyze, and mitigate potential risks to enhance decision-making, preparedness, and resilience.
What is Risk?
Risk is the possibility of unfavorable outcomes or losses due to uncertain events or decisions. It involves assessing the likelihood of unexpected events that can impact individuals, businesses, or organizations.
Risk is an integral part of various domains, such as finance, health, environment, and project management, requiring careful consideration to balance potential benefits against potential drawbacks.
Effective risk management involves proactive measures to minimize the impact of adverse events and make informed choices.
Types of Risk
Financial Risk
Arises from market fluctuations, credit defaults, or currency fluctuations, affecting investments and financial stability.
Operational Risk
Results from internal processes, systems, or human errors, impacting efficiency, compliance, and reputation.
Market Risk
Originates from changes in market conditions, affecting asset prices, interest rates, or supply and demand dynamics.
Credit Risk
Involves the potential for borrowers to default on loans or credit obligations, leading to financial losses.
Liquidity Risk
Relates to the ability to convert assets into cash without significant loss, impacting financial stability.
Reputation Risk
Arises from negative public perception, affecting trust, brand value, and stakeholder relationships.
Political Risk
Occurs due to political instability, changes in regulations, or geopolitical events, impacting investments and operations.
Legal Risk
Arises from non-compliance with laws, regulations, or contractual obligations, leading to legal disputes and penalties.
Environmental Risk
Relates to natural disasters, pollution, and climate change, affecting ecosystems and business operations.
Social Risk
Involves negative public reactions, boycotts, or protests due to social or ethical concerns.
