What is meant by the term 'risk' in ORM?

The term 'risk' in Operational Risk Management (ORM) refers specifically to an expression of potential harm, which encompasses both the severity of that potential harm and the probability of it occurring. This definition underscores the need for a systematic approach to identifying, assessing, and managing risks in various operations. Understanding risk in this way allows for a more comprehensive evaluation of what might happen in a given situation, enabling decision-makers to implement measures to mitigate those risks effectively.

By analyzing both severity and probability, organizations can prioritize risks based on their potential impact and likelihood, leading to informed decisions that enhance safety and operational success. This holistic view of risk is crucial in ORM, as it guides the creation of risk management strategies designed to prevent accidents and reduce the chances of adverse outcomes during various operations. In contrast, other choices either oversimplify the concept of risk or limit it to specific aspects that do not cover the full scope of its meaning in ORM.