Risk
[1] Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environment), often focusing on negative, undesirable consequences.
[1] The International Organization for Standardization (ISO) 31073 provides basic vocabulary to develop common understanding on risk management concepts and terms across different applications.
For example, economic risk may be the chance that macroeconomic conditions like exchange rates, government regulation, or political stability will affect an investment or a company's prospects.
It is a cornerstone of public health, and shapes policy decisions by identifying risk factors for disease and targets for preventive healthcare.
In the context of public health, risk assessment is the process of characterizing the nature and likelihood of a harmful effect to individuals or populations from certain human activities.
It can be considered as a form of contingent capital and is akin to purchasing an option in which the buyer pays a small premium to be protected from a potential large loss.
[4] The outcomes should be "scientifically sound, cost-effective, integrated actions that [treat] risks while taking into account social, cultural, ethical, political, and legal considerations".
[43] In the safety field it aims "to protect employees, the general public, the environment, and company assets, while avoiding business interruptions".
[17] Pascal's mugging is a philosophical thought experiment that demonstrates issues in assessing risk solely by the expected value of loss or return.
In finance, volatility is the degree of variation of a trading price over time, usually measured by the standard deviation of logarithmic returns.
An understanding that future events are uncertain and a particular concern about harmful ones may arise in anyone living in a community, experiencing seasons, hunting animals or growing crops.
[54] In ancient times, the dominant belief was in divinely determined fates, and attempts to influence the gods may be seen as early forms of risk management.
[58] An "availability cascade" is a self-reinforcing cycle in which public concern about relatively minor events is amplified by media coverage until the issue becomes politically important.
The theory distinguishes variations known as "group" (the degree of binding to social groups) and "grid" (the degree of social regulation), leading to four world-views:[65] Cultural Theory helps explain why it can be difficult for people with different world-views to agree about whether a hazard is acceptable, and why risk assessments may be more persuasive for some people (e.g. hierarchists) than others.
[68] This is consistent with psychometric research showing the importance of "dread" (an emotion) alongside more logical factors such as the number of people exposed.
Recognizing and respecting the irrational influences on human decision making may improve naive risk assessments that presume rationality but in fact merely fuse many shared biases.
One key distinction of dreadful risks seems to be their potential for catastrophic consequences,[73] threatening to kill a large number of people within a short period of time.
[81] Outrage is a strong moral emotion, involving anger over an adverse event coupled with an attribution of blame towards someone perceived to have failed to do what they should have done to prevent it.
In particular, because of bounded rationality (our brains get overloaded, so we take mental shortcuts), the risk of extreme events is discounted because the probability is too low to evaluate intuitively.
For instance, an extremely disturbing event (an attack by hijacking, or moral hazards) may be ignored in analysis despite the fact it has occurred and has a nonzero probability.
These human tendencies for error and wishful thinking often affect even the most rigorous applications of the scientific method and are a major concern of the philosophy of science.
[87] From the Theory of Leaky Modules[88] McElroy and Seta proposed that they could predictably alter the framing effect by the selective manipulation of regional prefrontal activity with finger tapping or monaural listening.
This is a practical way of manipulating regional cortical activation to affect risky decisions, especially because directed tapping or listening is easily done.
Researchers typically run randomised experiments with a treatment and control group to ascertain the effect of different psychological factors that may be associated with risk taking.
[91] People show risk aversion, so that they reject fair risky offers like a coin toss with an equal chance of winning and losing the same amount.
The essential fact is that "risk" means in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of this character; and there are far-reaching and crucial differences in the bearings of the phenomenon depending on which of the two is really present and operating.
[101] Mild risk follows normal or near-normal probability distributions, is subject to regression to the mean and the law of large numbers, and is therefore relatively predictable.
For example, recent research finds that insured individuals are significantly likely to divest from risky asset holdings in response to a decline in health, controlling for variables such as income, age, and out-of-pocket medical expenses.
[106] Anthony Giddens and Ulrich Beck argued that whilst humans have always been subjected to a level of risk – such as natural disasters – these have usually been perceived as produced by non-human forces.
potential source of danger, harm, or other undesirable outcome Note 1: A threat is a negative situation in which loss is likely and over which one has relatively little control.
