[[Actuarial Notes Wiki|Wiki]] / [[Actuarial Glossary]] / ==Risk== > **Risk** is the possibility of failing to meet objectives. Risk is only able to be defined in context. > - [Actuarial Glossary](https://www.soa.org/4a537f/globalassets/assets/files/edu/actuarial-glossary.pdf) , SOA - 2022 ## Categories of Risk Risk can be categorized based on the **type of objective** which is at risk. | Risk Category | Objective at Risk | | ----------------------------------- | ------------------------------------------------------------------- | | [[Financial Risk]] | Risk about the value of assets and investments. | | [[Operational Risk]] | Risk about internal processes, people, systems, or external events. | | [[Strategic Risk]] or Business Risk | Risk about decisions and how they're made. | ## Alternative Definitions of Risk > **Risk** is the effect of uncertainty on objectives. > - [[ISO 31000 - Risk Management - Guidelines]], ISO - 2018 > > The Society for Risk Analysis reviewed several definitions of risk in their [[Society for Risk Analysis Glossary|Risk Analysis Glossary]]. Risk can be defined as; >- an **effect** of uncertainty on objectives >- an **exposure** to an uncertain proposition >- an **uncertainty** about an event and the severity of its consequences >- a **probability** of an event times the expected severity of its consequences >- a **deviation** from a reference value >- a **triple** of scenario, probability, and consequence These definitions are applied in different contexts within risk management. Fields such as finance, audit, or emergency response each adopt different definitions of risk to fit their use cases. ## The Impact of a Risk Definition The [[Risk Taxonomy|language]] used to define risk has a direct impact on [[decision-making]]. For example, if risk is viewed purely as a exposure to a negative outcome, then the primary objective becomes to avoid it. This perspective may be appropriate in the domain of [[Health and Safety]], where the risk is to human well-being and life. However, if risk is thought of as a deviation from an expected reference value - whether positive or negative - it might be useful to take on some risk to gain insights and [[learn]] from new experience. Through this lens, risk can be modeled as a priced [[commodity]] where higher risk is associated with higher *expected returns*, a perspective is commonly applied in finance. See [[Modern Portfolio Theory]] to learn more about risk and return. ## Risk and Resilience Risk is highly related to the idea of [[resilience]], which is defined as the ability to recover quickly or "bounce back". Organizations with more resilience can afford to make riskier decisions.