## Definition of Risk & Uncertainty

### Definition of Risk

Risk is the materializing of an adverse event resulting in financial and non-financial losses. Non-financial loss can be loss of reputation, suppliers, customer etc.

Risk has two components:

- Impact (Hazard)
- Probability

## Impact (Hazard)

Impact or hazard is the expected loss in monetary terms that could result from risk if materialized. Monetary value of expected loss is often called as magnitude.

## Probability

Probability is the likelihood that adverse event will occur. Risk having more probability can be assumed as occurring more frequently.

### Definition of Uncertainty

Uncertainty is the event whose probability cannot be determined using mathematical formula.

In practice, risk and uncertainty is often used interchangeably.