5 Examples of Unmanaged Risk

John Spacey, updated on November 20, 2016

An unmanaged risk is a potential for a loss that isn't captured by a suitable risk management process. It differs from risk acceptance in that is no formal decision making is involved in taking on risk. An unmanaged risk may simply be missed by risk identification. Alternatively, unmanaged risk occurs because an organization, department or project doesn't manage risk at all. The following are hypothetical examples.

Investing

An investor purchases a stock based on the company's price/earnings ratio. The investor fails to consider liquidity risks associated with the company. The company has a large debt payment in the near future that it can not make. When the stock declines as the company defaults the investor is taken by surprise.

Product Development

A company with a failure is not an option culture ignores the risk that a product might fail on the market. They invest everything they have into a single new product. If the product fails the company may face financial distress.

Sustainability

A country allows a commercial interest to pollute the air and water without consideration of costs to health, quality of life and the environment.

Safety

A consumer purchasing a car doesn't check safety ratings and features. They unknowingly purchase a car that insurance companies view as amongst the most dangerous new cars on the road.

Projects

A construction project fails to consider how neighbors will react to the noise and commercial disruptions they intend to cause. The project runs into a variety of disputes that might have been mitigated by engaging neighbors early on.

Overview: Unmanaged Risk
Type	Risk Risk Management
Definition	A relevant risk that isn't considered by a suitable risk management process.
Related Concepts	Risk Management Risk Acceptance Risk Mitigation Risk Reduction Due Diligence