How is risk defined in the context of asset management?

In the context of asset management, risk is defined as a future event with uncertain occurrence and potential consequences. This definition encapsulates the idea that risk is inherently related to uncertainty and variability in outcomes, which can affect the performance and value of assets.

When managing assets, organizations must consider both the likelihood of certain events happening—whether they are operational disruptions, natural disasters, or market changes—and the impacts those events could have on their resources and objectives. The uncertainty involved in future events means that organizations must assess the risk to devise strategies that mitigate potential negative effects, enhance decision-making processes, and ensure the longevity of asset performance.

Considerations around risk in asset management involve evaluating different scenarios and their implications, which allows organizations to prioritize actions that protect against potential losses or exploit opportunities effectively. This understanding is key to creating robust asset management strategies that can withstand uncertainties in various environments.