Good morning David. Good morning Saleem. Let us start with the simple definition of risk.
What is risk? A good place to start right at the very beginning. If we don't know what risk is, then of course we can't do risk management and it's really important that we know what risk is. we have these definitions clear.
Fortunately there is an international standard in risk management which we can refer to. So ISO, the International Standards Organization, has published a standard in risk management, it's ISO 31000. and the title is Risk Management Principles and Guidelines. And in the ISO standard it has 11 principles of risk management, then it has a framework, and then it has a generic process. And of course it also includes a set of definitions, and the first definition is of course the definition of risk.
Now the ISO standard tries to be very clear and very concise, so the definition of risk is just five words. It says that risk is effect. of uncertainty on objectives. So clearly uncertainty is the first factor in considering what a risk is. All risks are uncertain and we'll come back to unpack some of the ideas behind that in some of the other questions in this section.
But the other important element of a risk, it's not just uncertain but it has an effect on something and the definition in the ISO standard says it is the effect of uncertainty on objectives. and we'll come back later to talk about the link with objectives as well. All of the other international standards, and there are unfortunately many standards in risk management, but they all take the same basic idea as the ISO standard and unpack those or expand them in different ways. So, for example, in the world of project risk management, the Project Management Institute has a standard and it describes or defines risk in this way.
It says a project risk. risk is an uncertain event or condition, so there's the uncertainty, an uncertain event or condition that if it occurs has a positive or negative effect on project objectives. And so there's the effect on objectives.
So the same idea as the ISO standard but in rather more words. And the same is true of all the other standards for risk management including standards in operational risk or environmental risk or financial risk. They all have those two ideas. that risk is to do with uncertainty and the effect on objectives? Of course uncertainty will be different from risk.
I think that's one of our key questions and we'll come back to that later on. There is an absolutely fundamental difference between uncertainty and risk which we must understand. But let's just start with the clear definition.
Thank you David. Thank you.