What Is Risk?

Quick answer

Risk is the possibility that an actual outcome will differ from what you expect, potentially causing a loss or another unwanted consequence.

Real-world example

You plan to save $500 for a laptop. An unexpected car repair means you may have less money available. The chance and impact of that expense are part of your financial risk.

Questions to ask yourself

• What is my goal and what assumptions am I making?
• What could go wrong, and how severe might the consequences be?
• Which options could reduce my exposure without creating bigger problems?

Put the idea into practice

Reading is only the beginning. Explore an interactive tool to see how your decisions can affect a simulated outcome.