Risk Management: Active Risk – What Is It, Formula, Example?
Project management and business operations are complex endeavors that require careful planning and risk management. One crucial aspect of risk management is understanding and effectively managing active risk. In this article, we will explore the definition of active risk, its formula, real-world examples, and effective strategies to mitigate risks and ensure a smooth project or business operation.
What is Active Risk?
Active risk, also known as specific risk or unsystematic risk, refers to the potential negative outcomes that can result from specific events or circumstances. These risks are within the control of the project manager or business owner and can be actively managed and mitigated. Active risks are different from passive risks, which are inherent in the overall market or industry and cannot be directly controlled.
Active risks can take various forms, including financial risks, operational risks, technical risks, legal risks, and reputational risks. For example, a financial risk could be the potential loss of investment due to market fluctuations, while a technical risk could be the failure of a critical system or software. Identifying and effectively managing active risks is crucial to