Risk

Risk^[2]

1. The degree of dispersion or variability around the expected or "best" value which is estimated to exist for the economic variable in question, e.g., a quantitative measure of the upper and lower limits which are considered reasonable for the factor being estimated.

2. An ambiguous term that can mean any of the following:

• All uncertainty (threats + opportunities); or
• Downside uncertainty (a.k.a. Threats); or
• The net impact or effect of uncertainty (threats – opportunities). The convention used should be clearly stated to avoid misunderstanding.

3. Probability of an undesirable outcome.

Risk (Project specific)

A risk taxonomy designation used to classify project risks for the purposes of selecting a quantification method (i.e., contingency determination). Project-specific risks are uncertainties (threats or opportunities) related to events, actions, and other conditions that are specific to the scope of a project. (e.g., weather, soil conditions, etc.). The impacts of project-specific risks are more or less unique to a project. The historically inconsistent project-specific nature of the risk-to-impact relationship favors the use of more deterministic methods of quantification such as expected value calculations. In this taxonomy usage, it is the opposite of “systemic” risks.^[2]

Risk (Systemic)

A risk taxonomy designation used to classify project risks for the purposes of selecting a quantification method (i.e., contingency determination). Systemic risks are uncertainties (threats or opportunities) that are an artifact of an industry, company or project system, culture, strategy, complexity, technology, or similar over-arching characteristics. The historically consistent nature of the systemic risk-to-impact relationship favors the use of methods such as empirically-based parametric modeling for quantification. In this taxonomy usage, it is the opposite of “project-specific” risks.^[2]