Definition of risk in administration

Definition of risk in administration

We make decisions all the time, right? However, it should be noted that we almost never think that each decision we make carries a certain risk and that our decisions also imply a certain cost (opportunity cost).

Therefore, in this article, I am going to provide you with a equipo of definitions that will allow you to understand what the concept of risk means.

I hope you find it useful.

Definition of risk according to authors

What is the definition of risks? Next I am going to provide you with different definitions that I have taken from different books, which focus on fundamentals of administration, Operative administrationfinance and economy.

Of course, at the end of the article you will find the bibliography.

Definition according to Don Hellriegel, Susan Y también.

Jackson, and John W.


«Risk refers to the condition that prevails when people perro identify a problem, specify the probability that certain events occur, identify solution options and establish the probability that each solution leads to a result (2021, p.

228 ).

Don Hellriegel

Definition of risk according to Lourdes Münch Galindo

“Risk is the degree of uncertainty that the entrepreneur has regarding the losses or gains generated by an investment” (2018, p. 86).

Lourdes Munch Galindo

Definition according to Stephen P.


“Situation in which the person responsible for making decisions is able to calculate the probability that certain results will occur” (2018, p.


Stephen P Robbins

Definition of risk according to Lee J.


I know that the definition is not going to change radically, but the previous definitions were taken from books focused on the fundamentals of management and next I am going to provide you with a definition of risk taken from a book on Operative administration.

«Risk is the measure of the probability and consequence of not reaching the defined goal of the project» (2013, p. 64).

Lee J. Krajewski

Definition of risk according to Arturo Morales Castro and José Antonio Morales Castro

Now, if you want to know the definition of risk in finance, then I am going to leave you the definition that I have taken from a book focused on the finance.

«Risk is the probability of the occurrence of an event and its consequences.

Financial risk refers to the probability of an event occurring that has financial consequences for an organization» (2014, p.


Arturo Morales Castro

It should be noted that the consequences of which the definition speaks, is contemplating both positive and negative.

That is, the results may be greater or less than expected.

I say this, since when we hear the word consequence, we generally think of negative aspects, but they do not necessarily have to be pure negative scenarios.

For example, if I buy a new machine, it is possible that production capacity will increase as a consequence.

Definition according to Aurelio Rodríguez Sánchez

Finally, if you are looking for the definition of risk in economyNext, I am going to provide you with two definitions, which I have taken from books focused on economics.

“Uncertainty level of expected returns” (2015, p.126).

Aurelio Rodriguez Sanchez

Definition according to Francisco Mochón Morcillo and Víctor Alberto Beker

“It is the possibility of damage.

In banking, the most common risks are those related to credit operations» (2008, p.


Francisco Mochon Morcillo

What is the risk?

In a more daily way, we perro come to understand that risk is the damage (physical or emotional) that both a company and a person perro receive.

However, I prefer to see risk as the degree of uncertainty about deviation from desired benefits or results.

In fact, the definitions are related to each other.

For example.

the last definition tells us that risk is the possibility of harm.

Well, an example of damage cánido be when you stop receiving an expected profit, right?

Well, it’s the same as saying that a deviation from the benefits you were expecting has occurred.

TRUE? The only thing is that any deviation that gives a result less than expected is being taken as a detriment.

However, there is also the possibility that the deviation will give a higher result than expected.

That is why I do not always like to see risk as a detriment, although it is true that we normally see it that way.

What do you think?

Examples of risks

  • Natural disaster.
  • Supplier failures.
  • Transportation delays.
  • Logistics failure.
  • Inventory risks (for example, supply delays).
  • Shortages in tarea (human talent).
  • Quality failure.
  • Loss of clients.
  • Regulatory risk.
  • Network provider failures.
  • Commodity price risks.
  • Demand forecast failure.
  • Failure to satisfy the demand.

What is risk management?

According to David Allen Collier and James R.

Evans, risk management “involves identifying risks that may occur, assessing the likelihood of their occurrence, determining their impact on the business and its customers, and identifying steps to mitigate those risks.

What is risk aversion?

In short, risk aversion is the discontent or displeasure that risky situations generate in us.

It should be noted that we are all risk averse, but to varying degrees.

This is thanks to the fact that we mostly prefer something that is certain to something that is uncertain.

For example, if I offer you the possibility of investing your money and I give you the following options, which do you prefer?

  • Earn 5% safe return every month.
  • Earn 60% return each month, but it is not certain.

Possibly if you have a lot of money, then you perro try the second option.

After all, if you lose the money, it probably won’t affect you.

However, that option cannot be chosen by someone who only has the money that he is going to invest.

Therefore, possibly, the fear of losing money (uncertainty) makes you opt for the first option.

“I prefer something safe even if it is little”

What is a hazard at work?

According to the Federal Tarea Law, in the novel title – work risks, in article 473, it tells us that: “Job risks are the accidents and illnesses to which workers are exposed in exercise or due to work”.


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 Definition of risk in administration
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