Nature & Treatment of Risk

In: Business and Management

Submitted By edwardjunfan
Words 988
Pages 4
Nature & Treatment of Risk
It is impossible to win the great prizes of life without running risks. So it’s needless to say the influence of ‘risk’ in our daily life as well as the business world itself. Well here are different risks and their nature briefly discussed with requisite statements.
Risk:
An acclaimed quote of Ralph Waldo Emerson about ‘risk’ says, ‘’I dip my pen in the blackest ink, because I am not afraid of falling into my inkpot.’’ Without being any more rhetoric here’s what Oxford English dictionary states about risk- “Risk is (Exposure to) the possibility of loss, injury, or other adverse or unwelcome circumstance; a chance or situation involving such a possibility.”
Risk may vary in different field of study! But definitely the core concept is “Uncertainty”. By nature people have a strong desire against uncertain events! These events can rather be stated as ‘threat’ imperiling their way of life. Consequently the concept of insurance came up with an aim to exclude or minimize those risks!
Many proclaimed authors made a careful distinction between objective and subjective risk whilst defining risk.
Objective risk is a relative variation of actual loss from expected loss. This variation usually decreases as the number of exposure increases. This type of risk can be measured by using deviation. It is extremely utile to an insurer.
On the other hand Subjective risk is the mental uncertainty. This risk varies from individually. In this case, the situation and the perception of an individual determine the level of subjective risk for that very person.

Concepts: Distinction from Risk
Chance of loss might be a close concept of risk. But it is rather the probability of an event to happen. The chance of loss may be identical for two groups. But risk especially objective risk can be quite different! Chance of loss is defined from two angles like…...

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