What is Risk?

Risk refers to the probability or likelihood of an event or outcome occurring, along with its potential consequences. In other words, it involves uncertainty about the future, particularly regarding the occurrence of adverse events or losses.

Features of Risk are:

• Probability: Risk is associated with the likelihood of different outcomes or events happening. It can range from highly probable events to highly improbable ones.
• Consequences: Risk considers the potential impact or consequences of an event, which may include financial losses, physical harm, or other negative effects.
• Measurement: Risks can be quantified and measured, often using probabilistic methods, statistical analysis, or risk assessment techniques. This allows for the estimation of the likelihood and severity of potential outcomes.
• Management: Risk Management involves identifying, assessing, and mitigating risks to minimize their impact or likelihood of occurrence. This may include implementing preventive measures, risk transfer (such as insurance), risk avoidance, or risk acceptance strategies.

Risk and Uncertainty are often used interchangeably. Risk involves situations where the probability of outcomes can be estimated or calculated based on available data or models; whereas, Uncertainty arises when outcomes are unknown or unpredictable due to lack of information or complexity.