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DGeneralUpdated 2 Nov 2026

Downside risk

Potential for investment losses or negative returns in financial markets.

Definition

Downside risk is the potential for investment losses or negative returns in financial markets. Founders reach for it when a vague conversation needs a shared, specific meaning. Name it clearly, then let the next decision — a hire, a price, a test, or a pass — follow from that meaning.

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In the room

How the word shows up in a real conversation.

You know Downside risk is doing work when it changes a weekly choice — price, hire, channel, or kill. The working definition: Potential for investment losses or negative returns in financial markets.

Common mistake

Using Downside risk as a label instead of a fact. If you cannot point to the evidence — a number, a customer, or a written assumption — you are using the word as jargon.

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