Risk classification: Difference between revisions

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{{infobox4
'''[[Risk]] [[classification]]''' is a categorization of identified risks based on factors such as: probability of its occurrence, estimated costs, hypothetical impact or amount of required countermeasures.
|list1=
<ul>
<li>[[Risk identification]]</li>
<li>[[Insurance risk]]</li>
<li>[[Cost risk]]</li>
<li>[[Strategic risk]]</li>
<li>[[Operational impact]]</li>
<li>[[Business segment]]</li>
<li>[[Dynamic risk]]</li>
<li>[[Business concept]]</li>
<li>[[Risk evaluation]]</li>
</ul>
}}
 
 
 
'''[[Risk]] classification''' is a categorization of identified risks based on factors such as: probability of its occurrence, estimated costs, hypothetical impact or amount of required countermeasures.


A systematic classification of risk approaches can relate to on of the following categories <ref>Concepts of risk: a classification 1992, p. 57</ref>:
A systematic classification of risk approaches can relate to on of the following categories <ref>Concepts of risk: a classification 1992, p. 57</ref>:
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Important classification related to possible alternatives to current situation<ref>Risk [[management]] and Simulation 2013, p. 6-11</ref>:
Important classification related to possible alternatives to current situation<ref>Risk [[management]] and Simulation 2013, p. 6-11</ref>:
* '''[[Pure risk]]'''- which can have only two possible outcomes: complete loss or no loss at all. That is a type of risk that cannot be controlled. Within pure risk we can determine: personal risks, legal risks, operational risks, liability risks, property risks.  
* '''[[Pure risk]]''' - which can have only two possible outcomes: complete loss or no loss at all. That is a type of risk that cannot be controlled. Within pure risk we can determine: personal risks, legal risks, [[operational risks]], liability risks, property risks.  
* '''Speculative risk'''- impact of speculative risk can be both: loss or gain. Within speculative risks we can determine: liquidity risks, reputational risks, business risks, strategic risks, credit risks, [[market]] risks (e.g. currency, equity).
* '''[[Speculative risk]]''' - impact of speculative risk can be both: loss or gain. Within speculative risks we can determine: liquidity risks, reputational risks, business risks, strategic risks, credit risks, [[market]] risks (e.g. currency, equity).


Due to the range of risk hypothetical impact:
Due to the range of risk hypothetical impact:
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Similar classification related to impact on people involved:
Similar classification related to impact on people involved:
* '''Systemic risk''' - probability of risk threats (loss or failure) common to entire group or system
* '''[[Systemic risk]]''' - probability of risk threats (loss or failure) common to entire group or system
* '''Unsystemic risk''' - not common to entire system.
* '''[[Unsystemic risk]]''' - not common to entire system.


Classification that distinguishes risks related to [[enterprise]] functioning:
Classification that distinguishes risks related to [[enterprise]] functioning:
* '''Invariable risk''' - concerns whole economic [[system]] (by taking into consideration factors like inflation level, [[unemployment]] level etc.),
* '''Invariable risk''' - concerns whole economic [[system]] (by taking into consideration factors like [[inflation]] level, [[unemployment]] level etc.),
* '''Variable risk''' - concerns the given [[organization]] (e.g. bankruptcy, strike).
* '''Variable risk''' - concerns the given [[organization]] (e.g. bankruptcy, strike).


Classification related to organization development related decisions<ref>Classification and Analysis of Risks in Software Engineering, p. 447</ref>:
Classification related to organization development related decisions<ref>Classification and Analysis of Risks in Software Engineering, p. 447</ref>:
* '''[[Project]] risk''' - concerns technical aspects of project realization,
* '''[[Project]] risk''' - concerns technical aspects of project realization,
* '''Organization risk '''- related to the wrong assessment of future market conditions by the investing [[company]],
* '''Organization risk ''' - related to the wrong assessment of future [[market conditions]] by the investing [[company]],
* '''Owners risk ''' - in the case of owners decisions that do not aim to diversify the company's development.
* '''Owners risk ''' - in the case of owners decisions that do not aim to diversify the company's development.


Classification that is referring to risk threats of losses:
Classification that is referring to risk threats of losses:
* '''Financial risk''' - risks of incurring financial losses that can be easily countable,
* '''Financial risk''' - risks of incurring financial losses that can be easily countable,
* '''Non financial risk''' - it has no direct impact on financial losses but has negative consequences in the social and natural [[environment]].
* '''Non financial risk''' - it has no direct impact on financial losses but has negative consequences in the social and natural [[environment]].


Other risk classifications:
Other risk classifications:
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* '''Static and dynamic risks'''.
* '''Static and dynamic risks'''.


==Footnotes==  
==Footnotes==
<references />
<references />
{{infobox5|list1={{i5link|a=[[Insurance risk]]}} &mdash; {{i5link|a=[[Total risk]]}} &mdash; {{i5link|a=[[Risk identification]]}} &mdash; {{i5link|a=[[Strategic risk]]}} &mdash; {{i5link|a=[[Cost risk]]}} &mdash; {{i5link|a=[[Change management in project]]}} &mdash; {{i5link|a=[[Risks and uncertainties]]}} &mdash; {{i5link|a=[[TOWS analysis]]}} &mdash; {{i5link|a=[[Scenarios of states in environment]]}} }}


==References==
==References==
* Acharya V.V., Pedersen L.H., Philippon T., Richardson M. (2016), [https://doi.org/10.1093/rfs/hhw088 ''Measuring Systemic Risk''] "The Review of Financial Studies", Volume 30, Issue 1, January 2017, Pages 2–47
* Acharya V.V., Pedersen L.H., Philippon T., Richardson M. (2016), [https://doi.org/10.1093/rfs/hhw088 ''Measuring Systemic Risk''] "The Review of Financial Studies", Volume 30, Issue 1, January 2017, Pages 2-47
* Cummins J.D., Smith B.D., Vance R.N., Vanderhel J.L.(2013), [https://books.google.pl/books?isbn=9401729115 ''Risk Classification in Life Insurance''] Springer Science & Business Media, LLC
* Cummins J.D., Smith B.D., Vance R.N., Vanderhel J.L.(2013), [https://books.google.pl/books?isbn=9401729115 ''Risk Classification in Life Insurance''] Springer Science & Business Media, LLC
* Gupta A. (2013), [https://www.researchgate.net/publication/265959077_Risk_Management_and_Simulation ''Risk management and Simulation''] CRC Press Inc., New York
* Gupta A. (2013), [https://www.researchgate.net/publication/265959077_Risk_Management_and_Simulation ''Risk management and Simulation''] CRC Press Inc., New York
* Hoodat H,Rashidi H. (2009), [https://pdfs.semanticscholar.org/5b5a/6a175fedcce1fe52ee4900de252597a24d23.pdf   ''Classification and Analysis of Risks in Software Engineering''] World Academy of Science, Engineering and [[Technology]] 32, p. 446-452
* Hoodat H,Rashidi H. (2009), [https://pdfs.semanticscholar.org/5b5a/6a175fedcce1fe52ee4900de252597a24d23.pdf ''Classification and Analysis of Risks in Software Engineering''] World Academy of Science, Engineering and [[Technology]] 32, p. 446-452
* Howarth I. C. (1988), [https://doi.org/10.1080/00140138808966697 ''The relationship between objective risk, subjective risk and behaviour''] "[[Ergonomics]]", 31:4, 527-535
* Howarth I. C. (1988), [https://doi.org/10.1080/00140138808966697 ''The relationship between objective risk, subjective risk and behaviour''] "[[Ergonomics]]", 31:4, 527-535
* Renn O. (1992), [https://elib.uni-stuttgart.de/handle/11682/7265 ''Concepts of risk: a classificatio''n] Krimsky, Sheldon (Hrsg.): "Social theories of risk". Westport, Conn. : Praeger. - ISBN 0-275-94168-X, S. 53-79
* Renn O. (1992), [https://elib.uni-stuttgart.de/handle/11682/7265 ''Concepts of risk: a classificatio''n] Krimsky, Sheldon (Hrsg.): "Social theories of risk". Westport, Conn. : Praeger. - ISBN 0-275-94168-X, S. 53-79
[[Category:Risk management]]
[[Category:Risk management]]


{{a|Natalia Kobos}}
{{a|Natalia Kobos}}

Latest revision as of 03:55, 18 November 2023

Risk classification is a categorization of identified risks based on factors such as: probability of its occurrence, estimated costs, hypothetical impact or amount of required countermeasures.

A systematic classification of risk approaches can relate to on of the following categories [1]:

  • Actuarial approach,
  • Probabilistic risk analysis,
  • Economics of risks,
  • Psychology of risk,
  • Social theories of risk,
  • Cultural theory of risk.

Examples of risk classifications

There are multiple ways to classify risks across listed above categories, but the most common classifications include:

Important classification related to possible alternatives to current situation[2]:

  • Pure risk - which can have only two possible outcomes: complete loss or no loss at all. That is a type of risk that cannot be controlled. Within pure risk we can determine: personal risks, legal risks, operational risks, liability risks, property risks.
  • Speculative risk - impact of speculative risk can be both: loss or gain. Within speculative risks we can determine: liquidity risks, reputational risks, business risks, strategic risks, credit risks, market risks (e.g. currency, equity).

Due to the range of risk hypothetical impact:

  • Fundamental risk - tend to affect a wide range of factors,
  • Particular risk - affects individual factors.

Similar classification related to impact on people involved:

  • Systemic risk - probability of risk threats (loss or failure) common to entire group or system
  • Unsystemic risk - not common to entire system.

Classification that distinguishes risks related to enterprise functioning:

  • Invariable risk - concerns whole economic system (by taking into consideration factors like inflation level, unemployment level etc.),
  • Variable risk - concerns the given organization (e.g. bankruptcy, strike).

Classification related to organization development related decisions[3]:

  • Project risk - concerns technical aspects of project realization,
  • Organization risk - related to the wrong assessment of future market conditions by the investing company,
  • Owners risk - in the case of owners decisions that do not aim to diversify the company's development.

Classification that is referring to risk threats of losses:

  • Financial risk - risks of incurring financial losses that can be easily countable,
  • Non financial risk - it has no direct impact on financial losses but has negative consequences in the social and natural environment.

Other risk classifications:

  • Economic and non-economic risk,
  • Quantifiable and non-quantifiable risk,
  • Static and dynamic risks.

Footnotes

  1. ↑ Concepts of risk: a classification 1992, p. 57
  2. ↑ Risk management and Simulation 2013, p. 6-11
  3. ↑ Classification and Analysis of Risks in Software Engineering, p. 447


Risk classification — recommended articles
Insurance risk — Total risk — Risk identification — Strategic risk — Cost risk — Change management in project — Risks and uncertainties — TOWS analysis — Scenarios of states in environment

References

Author: Natalia Kobos

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