Risk classification: Difference between revisions
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'''[[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, | ||
* | * '''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]]}} — {{i5link|a=[[Total risk]]}} — {{i5link|a=[[Risk identification]]}} — {{i5link|a=[[Strategic risk]]}} — {{i5link|a=[[Cost risk]]}} — {{i5link|a=[[Change management in project]]}} — {{i5link|a=[[Risks and uncertainties]]}} — {{i5link|a=[[TOWS analysis]]}} — {{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 | * 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 | * 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 | * 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
- ↑ Concepts of risk: a classification 1992, p. 57
- ↑ Risk management and Simulation 2013, p. 6-11
- ↑ 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
- Acharya V.V., Pedersen L.H., Philippon T., Richardson M. (2016), 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), Risk Classification in Life Insurance Springer Science & Business Media, LLC
- Gupta A. (2013), Risk management and Simulation CRC Press Inc., New York
- Hoodat H,Rashidi H. (2009), Classification and Analysis of Risks in Software Engineering World Academy of Science, Engineering and Technology 32, p. 446-452
- Howarth I. C. (1988), The relationship between objective risk, subjective risk and behaviour "Ergonomics", 31:4, 527-535
- Renn O. (1992), Concepts of risk: a classification Krimsky, Sheldon (Hrsg.): "Social theories of risk". Westport, Conn. : Praeger. - ISBN 0-275-94168-X, S. 53-79
Author: Natalia Kobos
