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5 Examples of Cost Of Risk

 , updated on May 08, 2023
Cost of risk is the cost of managing risk and incurring losses due to risk. It is a metric that can be calculated for a financial period or forecast for a future period. The following are common elements of cost of risk.

Administration Costs

The costs of managing risk such as the budget of a risk management team.

Mitigation Costs

The costs of reducing risk. For example, a firm that buys specialized hardware and software to reduce information security risks.

Risk Control Costs

The cost of operational processes designed to reduce risk such as credit checks that are run on customers.

Transfer Costs

The cost of transferring risk using techniques such as insurance or financial instruments.


Losses that occur because of a risk. For example, losses that occur when a customer fails to pay for delivered services is considered a loss due to credit risk.
Overview: Cost Of Risk
Risk Analysis
Risk Metric
The cost of risk management, risk control, risk mitigation, risk transfer and losses due to risk.
Cost of risk can be forecasted using estimates such as a risk value.
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