The formal definition of Risk (adopted by ISO 31000) accepts that risk is the effect of uncertainty on objectives and the deviation of actual outcomes from expectations.
- The definition puts emphasis on the objectives, which are always with reference to an individual or a Legal Entity. This highlights the subjective nature of risk
- The definition puts emphasis on the element of surprise. It is thus not aligned with the casual use of the term risk, in that a positive deviation from expectations (an unexpected but not adverse outcome) would not normally be characterised as risk
- In a business context Risk means, informally, the potential for Loss or other adverse outcome affecting an individual or an organization.
Issues and Challenges
- Frequently and erroneously assumed to be some combination of the probability of an event and its consequence (e.g. by constructing a product of quantitative measures of likelihood and severity)
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