About Me

So, I'm trapped in audit. At least for the time being. Whilst I'm here I may as well make constructive use of my time. So I'll share some of my thoughts and experiences

Sunday, April 17, 2011

The appropriate definition of risk

Unhelpfully, there are lots of different definitions of risk. For example, "a risk" can mean "a potential event". What helps me is thinking about what people mean when they ask the question "what is the risk?": they mean "what is the probability and significance of the outcome". Therefore risk is the probability and level of impact associated with an event.

But should it just be "event"? In some circumstances it may be helpful to think in terms of outcomes, situations and occurrences. For example, having insufficient premises isn't something that fits the definition of an event, but rather a situation.

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