The beginning of wisdom is the definition of terms.

(Socrates c. 470±400 BC)

The field of risk management and its various subdisciplines is riddled with terminology that is often unfamiliar to the uninitiated. A brief explanation of the key terms found in the world of risk is given below. We hope that this will be useful to the reader who is looking for further background to the field of risk, and who wishes to understand unfamiliar concepts in the various risk disciplines.

There are well over 300 terms in all categories of risk management. The explanations given should not be regarded as dictionary definitions but as explanatory notes. The list is not exhaustive, and concepts have been selected for inclusion here so that essential insights into all categories of risk can be provided. The class of risk where the term is normally used is indicated in brackets:

(Pure) Pure risk

(Insurance) Insurance

(Financial) Financial risk management

(Governance) Corporate failure/governance

(Risk-taking) Risk-taking

(RM) Risk management

(Operational) Operational risk/general business risk

(Business) Business/strategy risk

Abandonment

(Financial) The practice of letting an option expire unexercised.

Abatement

(Pure) Normally associated with risk control and loss prevention measures, it refers to the practice of reducing, alleviating or diminishing the effect of a potential source of harm, e.g. noise abatement.

Abduction

(Pure/Insurance) Generally used with reference to the peril of kidnap and ransom. Refers to the forceful removal of an individual against that person's will.

Abscondment

(Pure/Security) The disappearance or escape of a person, normally after having committed a crime. Commonly used with reference to the theft of money from an employer.

Absenteeism

(Operational) The practice of staying away from work by employees. The inference is usually that employees use devious means to avoid arriving for work.

Absolute risk

(Financial) This measures the rate of interest rate risk. The common practice is to calculate how much would be lost if the interest rate/time yield curve had a parallel shift of 1%.

Acceleration

(Pure) It has the same meaning as its general use, which is the rate of increase in speed. It relates to engineering, chemical, fire and safety risks.