External risks are generally something that is uncontrollable by the first party.

In contract law

contract law A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to t ...

, are risks that are produced by a non-human source and are beyond

human Humans (''Homo sapiens'') are the most abundant and widespread species of primate, characterized by bipedalism and exceptional cognitive skills due to a large and complex brain. This has enabled the development of advanced tools, cultu ...

control. They are unexpected but happen regularly enough in a general population to be broadly predictable, and may be the subject of

casualty insurance Casualty insurance is a defined term which broadly encompasses insurance not directly concerned with life insurance, health insurance, or property insurance. Casualty insurance is mainly liability coverage of an individual or organization for ne ...

. Good examples of external risks are

natural disasters A natural disaster is "the negative impact following an actual occurrence of natural hazard in the event that it significantly harms a community". A natural disaster can cause loss of life or damage property, and typically leaves some econ ...

such as

earthquakes An earthquake (also known as a quake, tremor or temblor) is the shaking of the surface of the Earth resulting from a sudden release of energy in the Earth's lithosphere that creates seismic waves. Earthquakes can range in intensity, fro ...

and

volcanoes A volcano is a rupture in the crust of a planetary-mass object, such as Earth, that allows hot lava, volcanic ash, and gases to escape from a magma chamber below the surface. On Earth, volcanoes are most often found where tectonic plates a ...

Insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...

adjusters analyze external risks on a normal basis. Measuring risks of the environment is common practice throughout insurance claims. As far as claims go, most external risks, or an "

Act of God In legal usage in the English-speaking world, an act of God is a natural hazard outside human control, such as an earthquake or tsunami, for which no person can be held responsible. An act of God may amount to an exception to liability in co ...

", are protected by

property insurance Property insurance provides protection against most risks to property, such as fire, theft and some weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, or ...

In project management

project management Project management is the process of leading the work of a team to achieve all project goals within the given constraints. This information is usually described in project documentation, created at the beginning of the development process. T ...

; Risks that are external to the project and the project manager cannot control. Good examples of external risks are changes in government

legislation Legislation is the process or result of enrolling, enacting, or promulgating laws by a legislature, parliament, or analogous governing body. Before an item of legislation becomes law it may be known as a bill, and may be broadly referred to ...

, changes in

strategy Strategy (from Greek στρατηγία ''stratēgia'', "art of troop leader; office of general, command, generalship") is a general plan to achieve one or more long-term or overall goals under conditions of uncertainty. In the sense of the " ...

from senior managers, and the

economy An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with th ...

Common examples

Hurricanes A tropical cyclone is a rapidly rotating storm system characterized by a low-pressure center, a closed low-level atmospheric circulation, strong winds, and a spiral arrangement of thunderstorms that produce heavy rain and squalls. Depend ...

Earthquakes An earthquake (also known as a quake, tremor or temblor) is the shaking of the surface of the Earth resulting from a sudden release of energy in the Earth's lithosphere that creates seismic waves. Earthquakes can range in intensity, fro ...

Tornadoes A tornado is a violently rotating column of air that is in contact with both the surface of the Earth and a cumulonimbus cloud or, in rare cases, the base of a cumulus cloud. It is often referred to as a twister, whirlwind or cyclone, alth ...

Floods A flood is an overflow of water ( or rarely other fluids) that submerges land that is usually dry. In the sense of "flowing water", the word may also be applied to the inflow of the tide. Floods are an area of study of the discipline hydrolog ...

* Volcanic Eruptions *

Lightning Lightning is a naturally occurring electrostatic discharge during which two electrically charged regions, both in the atmosphere or with one on the ground, temporarily neutralize themselves, causing the instantaneous release of an average ...

Fire Fire is the rapid oxidation of a material (the fuel) in the exothermic chemical process of combustion, releasing heat, light, and various reaction products. At a certain point in the combustion reaction, called the ignition point, flames ...

Disease A disease is a particular abnormal condition that negatively affects the structure or function of all or part of an organism, and that is not immediately due to any external injury. Diseases are often known to be medical conditions that a ...

(such as pandemics/epidemics) * Environmental Hazards (pollution) * Civil Disruptions (vandalism, terrorism)

Assessing external risks

Three separate aspects should be analyzed when determining the amount of external risk that exists. # Frequency of Occurrence - What are the odds of an external risk occurring in your situation? Do similar risk situations happen often in your area? This assesses the probability of the external risk. # Duration of the Occurrence - Over what time period will the external risk last? How long will the affected party be at an altered state due to this risk? This assesses the amount of time that would be lost due to the risk and its effects. # Loss of Assets - What types of property could be damaged or destroyed from this risk? This assesses the state of property and assets after the external risk occurs.

References

*Giddens, Anthony (1999). “Risk and Responsibility”. ''Modern Law Journal'', Vol. 62 No. 1, p. 4.

In contract law

In project management

Common examples

Assessing external risks

References

See also