glossary
Risk Statement with Example
Governance GlossaryPublished: May 5, 2025
The risk statement (statement of risk) is an administrative tool that provides a clear picture of risk and how it may impact an organisation. The statement is an important part of the risk management process. Its aim is to identify the threat or opportunity related to an event or situation and describe its potential consequences.
Risk Statements can help raise awareness within an organisation about which strategic priorities, policies, and operational processes are needed. They can help staff understand why risk responses are necessary, and how to plan for them should a risk materialise.
A risk statement may help clarify the need for new action plans and help organisational leaders see how their risk management activities are impacting operations and supporting the mission.
What Is a Risk Statement For?
A risk statement can benefit several business processes and activities, for example, capital and asset management, conflicts of interest, finances, governance, and human resources. It can support knowledge and information management activities, and help protect from privacy breaches, IT challenges, and legal liabilities. It is critical for policy development and implementation and managing organisational change.
As an administrative strategy, writing a risk statement can help identify reputational risks and build or strengthen partnerships with stakeholders. Organisations can also benefit from risk statements when dealing with ethics concerns. In addition, they can inform program design and delivery, project management, and political advocacy work.
Types of Risk Statements
Risk Statements can be both positive and negative and reflect the risk events and their impact. The statements can be broader, identifying common threats or opportunities and their impact, or specific.
Broad risk statements have the benefit of providing stability over a period of time, for example working with and storing sensitive information. While specific risks are targeted and detailed and may be less common. Specific risks reflect change and are usually identified by decision-makers, making them transparent and precise.
Designed to equip you with practical knowledge and tools to confidently navigate the complexities of risk at the board level.
How to Write a Risk Statement
“The key to writing a good risk statement is having a foundational understanding of risk components and their interrelationships,” says CPA Benjamin Power. Risk statements have three components: the risk event, the risk cause, and the risk impact. A risk event is a situation that could create an issue for the organisation. The risk cause is the reason the risk event may happen, for example, a loss of financial resources or human error. Risk impact is the effect a risk can have on operations if they happen. An example might be a fine or damaged reputation.
A risk statement should describe a specific threat or opportunity and its consequence on the organisation. In some cases, the driver (reason) for the threat or opportunity can be included in the language. When crafting a risk statement, be clear and concise, and make sure the three key elements have been well defined: event, impact, and driver. Here are examples of how to write a risk statement for a threat vs an opportunity.
Or
If (EVENT) occurs due to (DRIVER), the consequences could result in (NEGATIVE IMPACT).
Or
If (EVENT) occurs due to (DRIVER), the consequences could result in (POSITIVE IMPACT).
The consequences of a specific or broad risk clearly show why the risk is relevant to the business activities. As such, they should be quantified when possible, based on fact-finding, industry research data, and internal reports to better understand their relationship to the work.
Here is an example:
There are plenty of Risk Statement Templates available online. They can be adapted to your organisation’s specific needs and circumstances.
How to Use a Risk Statement
A risk statement is usually added to the corporate risk profile, a document that provides context about the potential impact of each risk on organisational goals. One organisation may develop several risk statements for a variety of issues. Together they should help the reader understand what could happen, why it may happen, and why the organisation should care.
Risk statement writing is done hand in hand with the risk identification and assessment process, which involves documenting the risks and assessing the likelihood and severity of risks. It is meant to help risk managers fully understand the impact of certain risks and what drives them. Ideally, a risk statement can help board members effectively communicate the risks and their threats (or opportunities) to others. They are, therefore, an important element of internal and external communication strategies.
Frequently Asked Questions
What is a Risk Statement and why is it important?
- Definition: A Risk Statement is a concise administrative tool that identifies a potential event (threat or opportunity), its cause (driver), and its impact on the organisation.
- Importance: It clarifies risks for decision-makers, raises awareness of priorities, and guides the design of action plans, helping to align risk management with strategic objectives.
What are the three key components of a well-written Risk Statement?
- Event: The situation that could occur (e.g., data breach, regulatory change).
- Driver: The root cause or reason the event might happen (e.g., outdated IT processes, human error).
- Impact: The consequence if the event occurs (e.g., financial loss, reputational damage), ideally quantified when possible.
How do I structure a Risk Statement for a negative event versus an opportunity?
- Threat format:
If (EVENT) occurs due to (DRIVER), the consequences could result in (NEGATIVE IMPACT). - Opportunity format:
If (EVENT) occurs due to (DRIVER), the consequences could result in (POSITIVE IMPACT). - Example (Threat): If our customer data is leaked due to outdated IT security processes, the consequences could result in a Privacy Act breach and fines up to $50 million.
- Example (Opportunity): If further operational realignment happens, there is an opportunity to partner with portfolio agencies to improve service delivery efficiencies.
When should I use broad versus specific Risk Statements?
- Broad statements: Capture common threats/opportunities over time (e.g., handling sensitive information) to provide stability in risk profiles.
- Specific statements: Target detailed, less-common incidents identified by decision-makers (e.g., a new software integration failure) to drive precise action.
How can I integrate Risk Statements into our risk management process?
- Corporate risk profile: Add each Risk Statement to document context, likelihood, and severity.
- Assessment & prioritisation: Use statements during risk identification to score and rank risks by impact.
- Communication: Share with board members and staff to explain why certain responses are needed and how they support strategic goals.
Podcast Episode: Risk Statements
Prefer to listen?
Check out the Our Cat Herder Herding Cats discussion on Risk Statements.
Related Terms
Additional Resources
Risk Statement Brainstorm Exercise
Keeping Your Reputation – Integrity Risks for NFPs
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Better Boards connects the leaders of Australasian non-profit organisations to the knowledge and networks necessary to grow and develop their leadership skills and build a strong governance framework for their organisation.
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