How do you define risk in the corporate world? It’s quite common to associate the meaning of risk to danger, right? However, I believe that risk is different from danger. Risk means a possibility of loss (or perhaps gain) that may arise in the future to generate a significant impact in an organisation.
In economics, they taught us the concept of “opportunity cost”. It states that in every opportunity, there is always something that must be given up to gain an alternative. If you choose A over B, the possible benefit of B is forgone. This is an example of how risk works inside any business. It is not about the danger that option A or B carries that triggers a company, but the risk is the possibility of a potential loss in deciding between the two options that were provided as a solution. Therefore, weighing how much is the probable loss or gain in each alternative would be the best way to handle the situation.
Think of a person who dreams of experiencing sky diving. The actual risk is not in the “danger that sky diving holds” but the possible loss in dropping that dream because of the uncontrolled factors that affected the decision.
It might be best to separate the meaning of risk to danger in your business like how you separate your revenue model from your business model when presenting to potential investors.
Let me know your thoughts with the comments below.