What Is Risk?

Uncertainty about a situation can often indicate risk, which is the possibility of loss, damage, or any other undesirable event. Most people desire low risk, which would translate to a high probability of success, profit, or some form of gain. Risk is the possibility of loss, damage, or any other undesirable event. For example, if sales for next month are above a certain amount (a desirable event), then orders will reduce the inventory, and there will be a delay in shipping orders (an undesirable event). If a shipping delay means losing orders, then that possibility presents a risk. Thus, there are two points to keep in mind when analyzing risk: Where is the risk and how significant is the risk.