Fundamentals of Risk Management

Appendix B
440
Term
Definition
reference
Loss control
Range of activities to reduce the potential 
impact of hazard risks on the organization, 
including loss prevention, damage limitation 
and cost containment
Chapter 13
Loss prevention
See ‘Loss control’
Chapter 13
Magnitude
Size of the event when a risk materializes, 
sometimes referred to as ‘severity’ of the 
event and representing the gross (or 
inherent) level of the risk
Figure 1.1
Mandatory, assurance, 
decision making, effective 
and efficient core 
processes (MADE2) 
Summary of the main reasons for 
undertaking a risk management initiative
Chapter 5
Material failure
Failure of controls in an organization, 
resulting in loss of a magnitude that is 
considered important by auditors
Chapter 34
Net risk
See ‘Impact’
Chapter 12
Operational risk
Defined in Basel II as ‘risk of loss or gain, 
resulting from inadequate or failed internal 
processes, people and systems or from 
external events’ and capable of impacting 
the operations of the organization
Chapter 30
Operational risk 
management (ORM)
Approach to risk management associated, 
in particular, with banks, insurance 
companies and other financial institutions, 
where the measurement of the level of 
‘operational risk’ is required by Basel II, 
Solvency II or similar requirement
Chapter 30
Operations
Activities of the organization designed to 
deliver products and services to customers 
or clients
Chapter 19
Opportunity risk
Category of risk that is associated with
the benefits of speculative opportunities
Chapter 3

---