Risk Management
It would seem on the surface that the term risk is a simple notion, when someone states that there is risk in a particular situation, the listener understands what is meant:
It would seem on the surface that the term risk is a simple notion, when someone states that there is risk in a particular situation, the listener understands what is meant: that in the given situation there is uncertainty about the outcome and the possibility exists that the outcome will be unfavourable. This loose intuitive notion of risk, which implies a lack of knowledge about the future and the possibility of some adverse consequence, is satisfactory for conversational usage, but for our purpose a somewhat more rigid definition is desirable.
Economists, statisticians, decision theorists, and insurance theorists have long discussed the concepts of risk and uncertainty in an attempt to construct a definition of risk that is useful for analysis in each field of investigation. So far, they have not been able to agree on a single definition that can be used in each field. A definition of risk that is suitable for the economist or statistician may be worthless as an analytic tool for the insurance theorist. The fact that each group treats a different body of subject matter requires the use of different concepts. Although the statistician, the decision theorist, and the insurance theorists all use the term risk, they may each mean something entirely different.