How is a 'hazard' defined in the context of risk?

In the context of risk, a 'hazard' is defined as anything that causes or increases the likelihood of loss. This definition highlights how hazards contribute to risks by either creating the potential for loss or elevating the probability of loss occurring. Hazards can take many forms, including physical hazards (such as slippery floors), moral hazards (such as dishonesty), and operational hazards (like failure to follow procedures).

Recognizing hazards is crucial for risk management, as identifying and understanding these elements allows organizations to develop strategies to mitigate them. By focusing on the relationship between hazards and potential losses, businesses can proactively reduce risk exposure, leading to more effective risk management practices and better protection against unexpected negative financial impacts.