Fundamentals of Risk Management

Glossary of terms
439
Term
Definition
reference
Frequency
See ‘Likelihood’
Chapter 1
Governance, risk and
compliance (GRC)
Integrated approach to risk management
and risk assurance based on the three lines
of defence
Chapter 35
Gross risk
See ‘Magnitude’
Figure 1.1
Hazard risk
Category of risk that is associated with
the management of pure risks or perils – the
effects of hazard risks need to be mitigated
Chapter 3
Impact
Effect on the finances, infrastructure, 
reputation and marketplace (FIRM) when a 
risk materializes
Chapter 12
Inherent risk
Level of a risk before any control activities
are applied, sometimes referred to as the
‘gross level’ or ‘absolute level’ of the risk
Figure 23.1
Insurance
See ‘Transfer’
Chapter 17
Internal audit
Internal or outsourced, yet independent
group of people, or set of activities,
monitoring the effectiveness and efficiency
of control activities
Chapter 35
Internal control
See Table 33.1 for a range of definitions of
‘Internal control’
Table 33.1
Leadership, involvement,
learning, accountability and
communication (LILAC)
Set of attributes that should be present in
order to achieve successful embedding of
(enterprise) risk management in the
organization
Table 24.3
Level of risk
Combination of the likelihood and impact of 
the risk, as established during the risk rating 
stage of risk assessment and can be 
determined at either gross (inherent) or net 
(residual) level
Chapter 10
Likelihood
Evaluation or judgement regarding the 
chances of a risk materializing, sometimes 
established as a ‘probability’ or ‘frequency’
Chapter 12

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