There are many different definitions of risk. 

Common sense: risk is something that is not good or bad and its consequences are negative that people do not want. Or in the dictionary, risk is interpreted as bad luck.

In general, risk is defined in the usual way: unlucky and negative on people's expectations.

However, the above definitions are incomplete and do not match the modern risk management model that is being widely applied in the world.

Risks according to ISO 31000:2018

To fully recognize "risk" and in accordance with modern governance models, we will learn the concept of risk according to ISO 31000:2018. As follows:

Risk is the effect of uncertainty on target.

According to the above definition, we need to note a few important points in order to identify risks:

Firstly, it must be uncertainty

In other words, if an event or phenomenon has a probability of occurring at 0% or 100%, it is not considered a risk. To explain more clearly, it is an event or phenomenon that happened (100% probability) or did not happen (0% probability).

Example: A win – draw – loss bet on an ongoing football match is considered to be qualified for uncertainty because the outcome is unknown. However, when the match is over and the outcome is clear, the event is no longer considered uncertain.

Second, have an effect on the target.

Accordingly, an object or phenomenon that does not affect the target is not considered a risk. We will analyze the above example to clarify this.

In the example above, when the football match is in progress, it is an uncertain event because we cannot know the outcome yet.

• A person A wants to bet on which of the two teams will win and the goal is to win the bet. Thus, the uncertainty in the outcome of the football match will affect Player A's goal of winning. 
• However, a person B only watches football and does not place bets, not caring about the outcome of the match. Accordingly, no matter what the outcome of the match, it will not affect the goal of player B.

We can see that the outcome of the football match is a risk for person A, but not a risk for person B.

The effects of risk are not always negative

Further analyzing the concept of risk according to ISO 31000:2018, the effect of risk on goals or expectations is not always negative, but includes positive. This is radically different from the conventional wisdom that risk is always negative.

The effect of uncertainty on goals can have both positive and negative effects.

Let's take exchange rate risk for analysis, when the exchange rate rises (local currency depreciates), it will have a positive impact on exporting companies (because it helps increase revenue) but a negative impact on companies specializing in importing (because of increasing import costs). When the exchange rate falls, the direction works in the opposite direction. As such, exchange rate volatility is considered a risk, and the measurement of exchange rate risk includes both positive and negative effects on profit targets, not just negative effects.