Which of the following represents a loss event in risk management?

In risk management, a loss event refers to a specific occurrence that leads to a negative impact on an organization's assets or operations. A physical asset degradation fits this definition because it involves the deterioration of tangible items, which can lead to financial losses, increased maintenance costs, or decreased operational efficiency. This kind of degradation represents a measurable risk event that can be quantified in terms of its financial impact, which is a core aspect of loss event analysis in the Factor Analysis of Information Risk (FAIR) framework.

Unrealized gains typically reflect potential increases in value that have not yet been realized through a sale or transaction, and although they can be significant for financial reporting, they do not constitute a loss event since they do not directly cause a financial detriment. Opportunity cost represents the lost potential benefits from alternative choices and does not directly relate to an actualized loss or incident. A financial expenditure on security, while it signifies resources spent to mitigate risk, does not by itself represent a loss event; it is more of a precautionary measure or an investment rather than a negative impact occurring as a result of a risk realization.

Overall, identifying physical asset degradation as a loss event aligns with the core principles of understanding and quantifying risks and losses in a structured risk management framework