Risk Assessment Key Terms

Learn what types of risk can be found through risk assessment
By Terri Deno A certain amount of risk is inevitable whether you have a financial business or a construction company. But with risk assessment, a company has the ability to get a better picture of where the problem areas are. A risk assessment will point out any potential problems in policies and practices that affect your company or that have an effect on outside environments. A risk assessment will lead to ways that a company can better manage risk.

Annualized rate of occurrence

The annualized rate of occurrence is a measure of the probability a specific risk will happen in one year.
Try:  Risky Thinking provides an example of how the annualized rate of occurrence, combined with annualized loss expectancy, can determine the probability of loss according to the amount of money potentially lost due to risk.

Risk communication

Risk communication happens when an open dialogue of opinion and information exists between those that assess and regulate risks within a company.
Try:  The World Health Organization provides an expanded definition of risk communication and how a dialogue can be started for an effective risk assessment and risk management plan.

Gap analysis

A gap analysis is a study in which organizations identify the needs when a risk occurs and the actual resources available to help reduce or stop the risk.
Try:  The Risk Glossary provides an expanded definition of gap analysis in risk assessment.

Inherent risk

An inherent risk is a risk that is not likely to be managed or controlled in any way. In finances, an inherent risk is a misstatement of facts before auditing.
Try:  The Peer Review Guide provides a list of characteristics related to common inherent risk indicators.

Risk assessment

A risk assessment is the analysis of the work environment and its potential risks. The risks are prioritized and evaluated according to the amount of loss, probability of a loss and the cost of putting countermeasures in place to mitigate the risk.
Try:  Risk Management, a magazine published by the Risk and Insurance Management Society (RIMS),  provides information on the debate of using formal risk assessments as opposed to more modern approaches to assessing risk in a business.

Risk tolerance

The risk tolerance of a business is the ability for that business to survive any losses associated with the determined risks.
Try:  Enterprise Risk Management provides information on risk appetite and how risk tolerance provides guidance for a business to control a risk's appetite.