What is material risk?

Material risk refers to the potential for loss or negative impact on an organization due to events or factors that could significantly affect its financial performance, reputation, or operational viability. This type of risk is considered "material" if it could influence the decisions of stakeholders, such as investors or regulators. Organizations typically assess and manage material risks to ensure long-term sustainability and compliance with regulatory requirements. Examples include market fluctuations, legal liabilities, and operational failures.