Risk Management Glossary: Key Concepts to Understand Risk Management

Uncertainty is always present in business, finance, and logistics. A company may face market changes, economic crises, operational problems, or even cyberattacks. To avoid being left adrift, there isRisk Managementor risk management, a discipline that helps anticipate scenarios, make safer decisions, and protect the organization's objectives.

To better understand this practice, we have gathered here aglossary of basic termsthat anyone interested in the subject should know.

Risk

It is the possibility that an event will occur that positively or negatively affects the objectives of a company or project. It does not always imply a loss; it can also open the door to new opportunities.

Risk management

It is the orderly process of identifying, analyzing, and monitoring risks, applying strategies to reduce, transfer, accept, or even take advantage of them.

Risk matrix

A tool that organizes risks according to two factors: the probability of their occurrence and the level of impact they would have. It serves to prioritize and focus resources on what is most important.

Qualitative analysis

A risk assessment method that is based on perceptions, expert judgments, or simple scales such as "high, medium, or low."

Quantitative analysis

A more numerical and technical approach. Statistical data, mathematical models, and tools such as simulations are used to calculate the probability and economic impact of risks.

Response plan

A document that establishes what will be done with each risk: mitigate it, transfer it, accept it, or take advantage of it.

Mitigation

Actions to reduce the probability or impact of a risk. Example: reinforcing cybersecurity to prevent attacks.

Transfer

When a company passes the risk to a third party, as occurs when hiring insurance or an external supplier.

Acceptance

In some cases, it is decided to live with the risk because its impact is low or the cost of reducing it would be higher than the risk itself.

Resilience

The ability of a company to resist, adapt, and recover quickly in the face of a crisis, such as a pandemic or a natural disaster.

Risk appetite

The level of risk that an organization is willing to assume to achieve its objectives. It depends on its culture, resources, and financial situation.

Exposure

The degree of vulnerability to a risk, calculated with the combination of probability and impact.

Residual risk

The one that remains even after having applied controls or prevention measures.

Compliance

Practices that ensure that the company complies with laws, regulations, and standards, reducing legal risks and sanctions.

Operational risk

It originates from internal failures in processes, human errors, fraud, or technological failures.

Financial risk

Risks that directly affect money: exchange rates, interest rates, liquidity, or payment defaults.

Reputational risk

Damage to the image and trust that customers, partners, and investors have in the company.

Strategic risk

It is related to decisions or events that affect the company's long-term objectives, such as changes in regulation or the emergence of new technologies.

Cyber risk

Threat linked to computer attacks, data theft, or failures in digital systems. It is one of the risks that is growing the most today.

Risk assessment

It is the process of identifying, analyzing, and classifying risks, and then deciding what actions to take on each of them.

Risk management is a discipline that has become essential in a changing world. It is not only about preventing losses, but also aboutanticipating opportunitiesand building more resilient organizations.
Knowing this glossary is a first step in understanding how uncertainty is managed in companies and how safer and more strategic decisions can be made.