Which term defines the cause of loss in risk management?

The term that defines the cause of loss in risk management is "peril." In risk management, a peril refers to the specific events or circumstances that can cause financial loss or damage. Common examples of perils include fire, theft, flood, and earthquake. Understanding perils is essential in identifying and assessing risks because it allows individuals and organizations to recognize the specific threats they may face and to take appropriate measures to mitigate those risks.

In contrast, hazards are conditions or situations that increase the likelihood of a peril occurring. For example, having a faulty electrical system in a building is a hazard because it raises the chance of a fire peril. Risk factors encompass broader elements that can influence the level of risk associated with a peril or hazard. Liability refers to legal responsibilities for damages or injuries, which is a different concept unrelated directly to the cause of loss. Understanding these distinctions enhances clarity in risk management practices.