what is risk

Risk refers to the possibility of something bad happening, often focusing on negative, undesirable consequences. In finance, risk refers to the degree of uncertainty and/or potential financial loss inherent in an investment decision. Risk takes on many forms but is broadly categorized as the chance that an outcome or investments actual gains will differ from an expected outcome or return. All investments carry some degree of risk, and it is any uncertainty with respect to investments that has the potential to negatively impact financial welfare. Risk can arise from market conditions, corporate decisions, political events, and more. In general, as investment risks rise, the potential for higher investment returns also increases. Risk can be managed by understanding the basics of risk and how it is measured. Risk management is the process of identifying, assessing, and controlling financial, legal, strategic, and security risks to an organizations capital and earnings.