Which statement best defines risk in project terms?

Which statement best defines risk in project terms?

• A. Hazard is a rare and extreme event that can cause negative outcomes for a project.
• B. Probability is the degree to which a risk event is likely to occur.
• C. Risk is the expected losses that a particular phenomenon might cause. It is a function of probability of particular occurrences and the losses each would cause.
• D. Severity is the impact of a risk on the project.

Answer: (C)

Risk in projects is about the chance that something unfavorable will happen and how big the impact would be on the project’s objectives. The best definition frames risk as the expected losses from a potential phenomenon, combining how likely the event is with how severe the loss would be if it occurs. This captures both probability and impact, which is why it’s the most complete way to define risk. Think of it as risk exposure: you estimate how often something might happen and multiply by the consequence if it does. For example, a 5% chance of a $100,000 loss translates to an expected loss of $5,000. The other options don’t fit as well because they isolate only one aspect—hazard is just the source of potential harm, probability alone ignores the size of the loss, and severity alone ignores how likely the event is.

Risk in projects is about the chance that something unfavorable will happen and how big the impact would be on the project’s objectives. The best definition frames risk as the expected losses from a potential phenomenon, combining how likely the event is with how severe the loss would be if it occurs. This captures both probability and impact, which is why it’s the most complete way to define risk.

Think of it as risk exposure: you estimate how often something might happen and multiply by the consequence if it does. For example, a 5% chance of a $100,000 loss translates to an expected loss of $5,000. The other options don’t fit as well because they isolate only one aspect—hazard is just the source of potential harm, probability alone ignores the size of the loss, and severity alone ignores how likely the event is.