“The identification, analysis and control of those risks which can threaten the operations, assets and other responsibilities of an organization is known as risk management”
Risk is basically defined as the combination of the probability of an event and its consequences. The management of risk recognizes and deals with the threats to an organization or person, the vulnerability being carried and the likelihood that the threat will meet the vulnerability, causing damage. These words effectively illustrate the nature of risk.
Risk is an integral aspect of everyday life and a natural ingredient to any activity. Different people, different organizations, different cultures have dramatically varying views on the level of risk which they can tolerate. Basically, there are two kinds of people with regard to risk tolerance, one are risk takers and others are risk averse.
Risk Averse are those people who avoid risk, they are reluctant to take any type of risk. They strongly oppose and dislike risk. Risk Takers are those who love to take risk; they enjoy taking risk, as they consider risk as challenge for them. Those people, who fit into the wide gap between the two extremes, bring their own personalities into businesses and organizations.
There is a wide range of risks; there are risks around the organization itself and risk related to the organization’s responsibilities to others. Risk will be looked at from the point of view of whether an incident is likely to occur. It is also widely necessary that how often an incident could happen means the frequency of the incident and how damaging the incident would be if and when it occurred means the severity of the incident.
It is the key to good risk management decision making to understand, not just whether an incident may occur and damage the organization but also the precise significance of such damage to the organization’s processes and to the responsibilities that the organization is carrying.