What Does "Risk" Really Mean?

For many of us, the word “risk” is one we use confidently in our everyday lives, to describe a potential negative outcome.  

How often do we use, or hear, phrases like: “what’s the risk of this happening?” or “what’s the risk if this happens?”

However, if we pause to think about what these phrases actually mean, it might be more accurate to say: “What is the likelihood of this happening” or “what are the potential consequences if this happens?”

At first glance, this might seem like a slightly different way to say the same thing. But when it comes to having risk conversations with stakeholders, it is helpful to make the distinction. To have a precise definition of “risk”, we must first define the three components of risk.

Understanding components of risk

Risk is defined as the likelihood that a hazard will produce a potential negative consequence. To better understand risk, let's dive into what these terms mean.

Hazard

A hazard is something that has the potential to go wrong, and create a negative outcome.

For example, fraying carpet on a staircase is a hazard. It is a state of being for an asset, with an associated set of potential consequences. Fraying carpet is predominantly a trip hazard, with the potential consequence being that someone could trip and fall on the uneven surface.

Consequence

Consequences are the possible negative outcomes of a hazard and is dependent on context.

In the example of the frayed carpet, different consequences could result, based on different contexts. If someone trips on the carpet while holding a coffee, spills the coffee but is otherwise fine, the consequence is scarcely more than a spilled coffee and grumpy staff member.

If the hazard trips someone who is carrying an expensive and breakable piece of equipment, and they seriously injure themselves, the consequence is far greater.

Likelihood

Likelihood is the measure of probability that the consequence will occur, and may be dependent on context.  

Continuing our frayed carpet example, if the staircase is in a commonly used area, bearing a lot of foot traffic every day, it is more likely that a consequence will result. If that carpet is in a lower traffic area of the building, the likelihood of a consequence occurring is lower, based on the lower number of users.

Understanding 'risk'

"Risk" is a complicated concept, however it is one that's important for facility managers to be able to speak about with confidence. That's why we've created a free eBook - Improving Risk Resilience, which is available for download here. In this guide, deepen your understanding of risk, and empower yourself to have risk conversations with confidence.