What does the term frequency refer to in risk management?

In risk management, frequency specifically refers to the total number of losses that occur over a defined period of time. This metric is important because it helps organizations understand how often a particular risk or loss event occurs, which can inform their risk assessment and management strategies. A higher frequency of losses may indicate a need for more robust risk controls or preventative measures.

Understanding loss frequency allows risk managers to analyze trends over time, assess the effectiveness of their current risk management policies, and allocate resources appropriately to mitigate risks. By focusing on the number of occurrences rather than the severity of the losses or potential causes, organizations are better equipped to identify patterns and make informed decisions based on empirical data.