The term 'risk' has several meanings. To the ordinary man in the street 'risk' means exposure to danger. The word Risk is defined as under in different dictionaries : a) Concise Oxford Dictionary: Risk: hazard, chance of bad consequences, loss etc.; exposure to mischance., b) Chambers English Dictionary: Risk: hazard, danger, chance of loss or injury: the degree of probability of loss; a Person, thing or factor likely to cause loss or danger.
ISO 31000 - standard prescribed by The International Organisation for Standardization - defines risk as the effect of uncertainty on objectives, whether positive or negative.
Professor Frank Knight in 'Risk, Uncertainty and Profit' identified uncertain events into two main categories: Those, for which the probability of occurrence can be calculated either on a rational basis or on the basis of statistical analysis of a number of similar events that have occurred in the past, are Risks., Events for which analysis is impossible by virtue of the fact that they are either an 'one-off' event or because their occurrence does not follow an apparent pattern of events, are Uncertainties.
Risk is, therefore, defined as the variation in the outcome that occurs over a specified period in a given situation.
The Probability of Occurrence or the chance that an event may take place is defined as the number of occasions a particular event will occur in an infinitely large number of independent events.
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