Organisations are subject to ‘risk’ on numerous levels, which can lead to threats that block their future performance and success. By minimising the impact of risks, an organisation should find it easier to operate in markets if these unwelcome events materialise.

Risk (or uncertainty) is the mixture of the probability of an event happening and its outcomes. Risk outcomes can either have a positive or negative effect on business activity, so we should not assume that all risk is bad even though the term “risk” is generally seen as negative. For this reason, uncertainty is a term more commonly used in risk management. For more information on this topic, see ‘Upside Risk’.

For example, a risk activity as basic as crossing the road holds a certain percentage of risk value in terms of being hit by a car (the outcome), yet the likelihood of this outcome (the probability) is relatively low.

Risk Management expands on the idea of risk to include our overall approach and actions in response to risk activity.

Risk Management involves, identifying and assessing all possible uncertainties within an organisation and developing a plan to reduce and manage their possible effects. It reduces the probability of undesirable events occurring and minimises their impact before they take place. When risk is positive and opportunities arise, Risk management helps to increase the likelihood and impact of desirable business activity.