What is a risk?


Look in any dictionary and you’ll find a definition of risk. Here’s one: risk n the possibility of incurring misfortune or loss; hazard, at risk, vulnerable.


Other definitions, of which there are many, include: The combination of the probability of an event and its consequences;


The threat or possibility that an action or event will adversely or beneficially affect an organisation’s ability to achieve its objectives; The effect of uncertainty on objectives; The science of good guessing.


What we’re really talking about is a potential future problem – or, indeed, opportunity – or the potential future effect of a decision or an action that we take now. And every decision we make or action we take contains some element of risk.


Risks come about when the vulnerabilities in our systems, processes, facilities or resources are exploited by threats. Examples might include the burglar or hacker who exploits the vulnerabilities in our physical or IT security system, or a fire that starts due to an electrical fault and spreads because of weaknesses in our fire detection and suppression systems, errors made by inexperienced or insufficiently trained staff, or a whole host of other things (see page 17 for more examples of the risks that our businesses might face).


Risks can arise as a result of our own business’s activities or as a result of external factors such as legislation, market forces, interest or exchange rate fluctuations, the activities of others or even the weather. They can be a product of the business environment, the natural environment, the political or economic climate or of human inadequacies, failings or errors.


14 CHAPTER 1


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