Definitions of risk

The Oxford English Dictionary definition of risk is as follows: 'a chance or possibility of danger, loss, injury or other adverse consequences' and the definition of at risk is 'exposed to danger'. In this context, risk is used to signify negative consequences. However, taking a risk can also result in a positive outcome. A third possibility is that risk is related to uncertainty of outcome.


Types of risks

Risk may have positive or negative outcomes or may simply result in uncertainty. Therefore, risks may be considered to be related to an opportunity or a loss or the presence of uncertainty for an organization. Every risk has its own characteristics that require particular management or analysis. In this book, as in the Guide 73 definition, risks are divided into three categories:

• hazard (or pure) risks;

• control (or uncertainty) risks;

• opportunity (or speculative) risks.


Risk description

In order to fully understand a risk, a detailed description is necessary so that a common understanding of the risk can be identified and ownership/responsibilities may be clearly understood. Table 1.2 provides information on the range of information that must be recorded to fully understand a risk. The list of information set out in Table 1.2 is most applicable to hazard risks and the list will need to be modified to provide a full description of control or opportunity risks.


Inherent level of risk

It is important to understand the uncontrolled level of all risks that have been identified. This is the level of the risk before any actions have been taken to change the likelihood or magnitude of the risk. Although there are advantages in identifying the inherent level of risk, there are practical difficulties in identifying this with certain types of risks.