Risk is the possibility of something bad happening, comprising a level of uncertainty about the effects and implications of an activity, particularly negative and undesirable consequences. Risk theory, assessment, and management are applied but substantially differ in different practice areas, such as business, economics, environment, finance, information technology, health, insurance, safety, security, and privacy. The international standard for risk management, ISO 31000, provides general guidelines and principles on managing risks faced by organizations.
Definition
The Oxford English Dictionary (OED) cites the earliest use of the word in English (in the spelling of risque from its French original, 'risque') as of 1621, and the spelling as risk from 1655. While including several other definitions, the OED 3rd edition defines risk as "(Exposure to) the possibility of loss, injury, or other adverse or unwelcome circumstance; a chance or situation involving such a possibility". The Cambridge Advanced Learner's Dictionary defines risk as "the possibility of something bad happening". Some have argued that the definition of risk is subjective and context-specific. The International Organization for Standardization (ISO) 31073 defines risk as:effect of uncertainty on objectives Note 1: 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: Objectives can have different aspects and categories, and can be applied at different levels.
Note 3: Risk is usually expressed in terms of risk sources, potential events, their consequences and their likelihood. Other general definitions include:
"Source of harm" The earliest use of the word "risk" was as a synonym for the much older word "hazard", meaning a potential source of harm. This definition comes from Blount's "Glossographia" (1661) and was the main definition in the OED 1st (1914) and 2nd (1989) editions. Modern equivalents refer to "unwanted events" or "something bad that might happen". "Chance of harm" This definition comes from Johnson's "Dictionary of the English Language" (1755), and has been widely paraphrased, including "possibility of loss" or "probability of unwanted events". "Uncertain events affecting objectives" This definition was adopted by the Association for Project Management (1997). With slight rewording it became the definition in ISO Guide 73. "Uncertainty of outcome" This definition was adopted by the UK Cabinet Office (2002) to encourage innovation to improve public services. It allowed "risk" to describe either "positive opportunity or negative threat of actions and events". "Potential returns from an event ['a thing that happens or takes place'], where the returns are any changes, effects, consequences, and so on, of the event" This definition from Newsome (2014) expands the neutrality of 'risk' akin to the UK Cabinet Office (2002) and Knight (1921). "Human interaction with uncertainty" This definition comes from Cline (2015) in the context of adventure education.
Versus uncertainty In his seminal 1921 work Risk, Uncertainty, and Profit, Frank Knight established the distinction between risk and uncertainty.
... Uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has never been properly separated. The term "risk," as loosely used in everyday speech and in economic discussion, really covers two things which, functionally at least, in their causal relations to the phenomena of economic organization, are categorically different. ... The essential fact is that "risk" means in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of this character; and there are far-reaching and crucial differences in the bearings of the phenomenon depending on which of the two is really present and operating. ... It will appear that a measurable uncertainty, or "risk" proper, as we shall use the term, is so far different from an unmeasurable one that it is not in effect an uncertainty at all. We ... accordingly restrict the term "uncertainty" to cases of the non-quantitive type. Thus, Knightian uncertainty is immeasurable, not possible to calculate, while in the Knightian sense risk is measurable.
By field
Mathematical
Triplets Risk is often considered to be a set of triplets
R = ( s i , p i , x i ) {\displaystyle {\text{R}}=(s_{i},p_{i},x_{i})} for i = 1,2,....,N where:
s i {\displaystyle s_{i}} is a scenario describing a possible event
p i {\displaystyle p_{i}} is the probability of the scenario
x i {\displaystyle x_{i}} is the consequence of the scenario
N {\displaystyle N} is the number of scenarios chosen to describe the risk Risks expressed in this way can be shown in a risk register or a risk matrix. They may be quantitative or qualitative, and can include positive as well as negative consequences. An updated version recommends the following general description of risk:
R = ( A , C , U , P , K ) {\displaystyle R=({A,C,U,P,K})}
where:
A {\displaystyle A} is an event that might occur
C {\displaystyle C} is the consequences of the event
U {\displaystyle U} is an assessment of uncertainties
P {\displaystyle P} is a knowledge-based probability of the event
K {\displaystyle K} is the background knowledge that U and P are based on
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