Definition of Risk


Definition of Risk:

Risk can be defined in many ways.  When we think about the definition of risk, we think about the following:

  • as any source of randomness or chance that an event may occur.
  • Risk can have an adverse impact on the operations, assets, or cash flows of a company or individual.
  • Risks can be financial versus non financial risks

Types of risk include the following:

  • Financial risk
    • Market Risk
    • Funding risk
    • Credit risk
    • Liquidity risk
    • Legal risk
  • Natural or man made perils
  • Accidents
  • Hazards
    • Human
    • Environmental
    • Mechanical
    • Energy
    • Chemical

 

Risk can also be broken down between Core and Non-Core risks.

  • Core risks facing a business is the risk that the firm is in business to take and manage.
  • Non-core risks are risks that the firm does not necessarily need to retain in order to operate in primary business.

 

Other related topics:

See Risk Management

 

Comments

comments

  • Buying insurance is an essential step toward protecting the property you insure and your other assets that might otherwise be vulnerable when someone makes a claim against you. But many types of insurance come with limits that leave you without adequate coverage in certain situations. All risk insurance offers a high level of coverage by including risks that other forms of insurance leave out. All risk insurance has benefits and drawbacks for customers. The key advantage is the fact that an all risk policy removes all doubt as to what is and is not covered. It also provides additional peace of mind and protects the policyholder’s valuable property. However, all risk insurance usually comes at a higher price than insurance with less comprehensive coverage. All risk policies include coverage for extremely unlikely events, many of which will never occur, raising the cost of premiums. It may also provide a false sense of security even though it still omits certain risks and does nothing to decrease the likelihood of a disaster occurring.

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