Shopping on line can be easy, simple and save you lots of money. It can also take a lot of your time, frustrate you, and result in unwanted purchases. Now the same can be said for regular high street shopping, but with the vast opportunity presented by the Internet it will pay you to spend a few minutes reading this and understanding how to better optimize your Risk shopping experience:

1. Compare - without doubt the biggest advantage that the Risk offers shoppers today is the ability to compare thousands of Risk at a time. This is a great thing, but not necessarily all the time! Too much can be daunting at times so take advantage of the great comparison sites and where possible let them do the hard work for you.

2. Research - if it has been said it will be on the internet. Ignorance is no longer a justifiable reason for buying the wrong thing. Take the time to research in detail everything that you could possible want to know about

3. Testimonials - don't know anybody that has bought a Risk? Wrong! If the Risk is good the internet will let you know. Use the Internet as a friend and get testimonials before you buy.

4. Questions - Got a question about Risk then search the Forums, FAQ's, Blogs etc. Don't be afraid to ask .....

5. Reputation - Never heard of the company selling Risk? Don't worry, no reason why you should know every company in the world, but you know someone that does! Use the internet to find out what people are saying about Risk and build up a picture of their reputation for sales, returns, customer service, delivery etc.

6. Returns - still worried that even after all of the above your Risk wont be what you want? Check out the returns policy. There is so much competition now that someone, somewhere is bound to offer the terms that you are comfortable with.

7. Feedback - happy with your Risk then let people know, after all you are depending on others people input in your buying decision, so why not give a little back.

8. Security - check for the yellow padlock on the Risk site before you buy, and the s after http:/ /i.e. https:// = a secure site

9. Contact - got a question about Risk, or want to leave a comment then check out the sites contact page. Reputable companies have them and respond.

10. Payment - ready to pay for your Risk, then use your credit card or PayPal! Be aware of companies that don't accept them, there may be genuine reasons but given the huge amount of choice you have when buying online there is no reason at all not to buy via credit card or PayPal.

For the Parker Brothers board game, see risk (game)

Risk is a concept that denotes a potential negative impact to an asset or some characteristic of Value (economics) that may arise from some present process (general) or future event (probability theory).In everyday usage, risk is often used synonymously with the probability of a known loss.Paradoxically, a probable loss can be uncertain and relative in an individual event while having a certainty in the aggregate of multiple events (see risk vs. uncertainty below).

Risk is the possibility of an event occurring that will have an impact on the achievement of objectives. Risk is measured in terms of impact and likelihood.http://www.theiia.org/guidance/standards-and-practices/professional-practices-framework/standards/standards-for-the-professional-practice-of-internal-auditing/?search=glossary&C=816&I=2343

Risk communication and risk perception are essential factors for all human decision making.

Definitions of risk There are many more and less precise definitions of risk; they depend on specific applications and situational contexts.It can be assessed qualitatively or quantitatively.

Qualitatively, risk is considered proportional to the expected losses which can be caused by an event and to the probability of this event. The harsher the loss and the more likely the event, the greater the overall risk.

Frequently in the subject matter literature, risk is defined in pseudo-formal forms where the components of the definition are vagueand ill-defined, for example, risk is considered as an indicator of Wiktionary:threat, or depends on threats, vulnerability, impact and uncertainty.

In engineering, the quantitative engineering definition of risk is:

Risk = {(probability\ of\ an\ accident)} \times {(losses\ per\ accident)} .

Independently, on the wide use this definition, for example in nuclear energy and other potentially dangerous industries, measuring engineering risk is often difficult; the probability is assessed by the frequency of the past similar events (or by event-tree methods), but rare failures are hard to estimate if an event tree cannot be formulated, and loss of human life is generally considered beyond estimation —however, radiological release (e.g., GBq of radio-iodine) is usually used as a surrogate.There are many formal methods used to assess or to "measure" risk, considered as one of the critical indicators important for human decision making.

Financial risk is often defined as the unexpected variability or Volatility (finance) of returns and thus includes both potential worse-than-expected as well as better-than-expected returns. References to negative risk below should be read as applying to positive impacts or opportunity (e.g., for "loss" read "loss or gain") unless the context precludes.

In statistics, risk is often mapped to the probability of some event which is seen as undesirable. Usually, the probability of that event and some assessment of its expected harm must be combined into a believable scenario (an outcome), which combines the set of risk, regret and reward probabilities into an expected value for that outcome. (See also Expected utility.)

Thus, in decision theory, the risk function of an estimator δ(x) for a parameter θ, calculated from some observables x, is defined as the expectation value of the loss function L,

R(\theta,\delta(x)) = \int L(\theta,\delta(x))\times f(x|\theta)\,dx

In information security , a risk is defined as a function of three variables:
  • the probability that there is a threat
  • the probability that there are any vulnerability
  • the potential impact.


    • If any of these variables approaches zero, the overall risk approaches zero.

    The management of actuarial risk is called risk management.

    Historical background Scenario analysis matured during Cold War confrontations between major powers, notably the United States and the Soviet Union. It became widespread in insurance circles in the 1970s when major oil spill forced a more comprehensive foresight. The scientific approach to risk entered finance in the 1980s when derivative (finance) proliferated. It reached general professions in the 1990s when the power of personal computing allowed for widespread data collection and numbers crunching.

    Governments are apparently only now learning to use sophisticated risk methods, most obviously to set standards for environmental regulation, e.g. "pathway analysis" as practiced by the United States Environmental Protection Agency.

    Risk vs. uncertainty In his seminal work Risk, Uncertainty, and Profit, Frank Knight (1921) established the distinction between risk and uncertainty.

    Insurance and health risk Insurance is a risk-reducing investment in which the buyer pays a small fixed amount to be protected from a potential large loss. Gambling is a risk-increasing investment, wherein money on hand is risked for a possible large return, but with the possibility of losing it all. Purchasing a lottery ticket is a very risky investment with a high chance of no return and a small chance of a very high return. In contrast, putting money in a bank at a defined rate of interest is a risk-averse action that gives a guaranteed return of a small gain and precludes other investments with possibly higher gain.

    Risks in personal health may be reduced by primary prevention actions that decrease early causes of illness or by secondary prevention actions after a person has clearly measured clinical signs or symptoms recognized as risk factors. Tertiary prevention (medical) reduces the negative impact of an already established disease by restoring function and reducing disease-related complications. Ethical medical practice requires careful discussion of risk factors with individual patients to obtain informed consent for secondary and tertiary prevention efforts, whereas public health efforts in primary prevention require education of the entire population at risk. In each case, careful communication about risk factors, likely outcomes and certainty must distinguish between causal events that must be decreased and associated events that may be merely consequences rather than causes.

    Economic risk Insight The central insight in the methodology for incorporating economic risks arise from the realization of the fact that however manifold and diverse might be the causes, or factors, of risks around a specific project or business (for instance, the hike in the price for raw materials, the lapsing of deadlines for construction of a new operating facility, disruptions in a production process, emergence of a serious competitor on the market, the loss of key personnel, the change of a political regime, natural contingencies, etc.), all of these are ultimately manifested under only two guises. According to CCF Conception the economic risk consists in that: Actual positive conventional cash flows (income, inflows) turn out to be less than expected AND / OR Actual negative conventional cash flows (expenditures, outflows) turn out to be larger than expected (in absolute terms).

    Such lucid and unambiguous conceptual treatment of such a complex and multi-faceted notion as the economic risk emphasizes the very core of the question. The economic risk is not an abstract ‘uncertainty’ or ‘possibility of failure’ or changeableness (variability) of the outcome… The economic risk – is a monetary amount which might be under-collected and/or over-paid. Just as in music, one must use musical notes and staves—not alphabet letters or colors—to render a melody, in describing economic risk, we must ultimately operate with monetary units and not with the percentages of discount rates, magnitudes of volatility or anything else.(See .)

    In business Means of assessing risk vary widely between professions. Indeed, they may define these professions; for example, a doctor manages medical risk, while a civil engineer manages risk of structural failure. A professional code of ethics is usually focused on risk assessment and mitigation (by the professional on behalf of client, public, society or life in general).

    In the workplace, incidental and inherent risks exist. Incidental risks are those which occur naturally in the business but are not part of the core of the business. Inherent risks have a negative effect on the operating profit of the business.

    Criticism Criticism has been leveled at the amoral ("rational") application of quantitative risk assessment.

    Risk-sensitive industries Some industries manage risk in a highly quantified and numerate way. These include the nuclear power and Aerospace manufacturer, where the possible failure of a complex series of engineered systems could result in highly undesirable outcomes. The usual measure of risk for a class of events is then, where P is probability and C is consequence:

    R = P (\mbox{of the Event}) \times C

    The total risk is then the sum of the individual class-risks.

    In the nuclear industry, consequence is often measured in terms of off-site radiological release, and this is often banded into five or six decade-wide bands.
    .

    The risks are evaluated using fault tree/event tree techniques (see safety engineering). Where these risks are low, they are normally considered to be "Broadly Acceptable". A higher level of risk (typically up to 10 to 100 times what is considered Broadly Acceptable) has to be justified against the costs of reducing it further and the possible benefits that make it tolerable—these risks are described as "Tolerable if ALARP". Risks beyond this level are classified as "Intolerable".

    The level of risk deemed Broadly Acceptable has been considered by regulatory bodies in various countries—an early attempt by UK government regulator and academic F. R. Farmer used the example of hill-walking and similar activities which have definable risks that people appear to find acceptable. This resulted in the so-called Farmer Curve of acceptable probability of an event versus its consequence.

    The technique as a whole is usually referred to as Probabilistic Risk Assessment (PRA) (or Probabilistic Safety Assessment, PSA). See WASH-1400 for an example of this approach.

    In finance In finance, risk is the probability that an investment's actual return will be different than expected. This includes the possibility of losing some or all of the original investment. It is usually measured by calculating the standard deviation of the historical returns or average returns of a specific investment.

    In finance, risk has no one definition, but some theorists, notably Ron Dembo, have defined quite general methods to assess risk as an expected after-the-fact level of regret. Such methods have been uniquely successful in limiting interest rate risk in financial markets. Financial markets are considered to be a proving ground for general methods of risk assessment.

    However, these methods are also hard to understand. The mathematical difficulties interfere with other social goods such as disclosure, valuation and transparency (humanities). In particular, it is often difficult to tell if such financial instruments are "hedging" (purchasing/selling a financial instrument specifically to reduce or cancel out the risk in another investment) or "gambling" (increasing measurable risk and exposing the investor to catastrophic loss in pursuit of very high windfalls that increase expected value).

    As regret measures rarely reflect actual human risk-aversion, it is difficult to determine if the outcomes of such transactions will be satisfactory. Risk seeking describes an individual whose utility function's second derivative is positive. Such an individual would willingly (actually pay a premium to) assume all risk in the economy and is hence not likely to exist.

    In financial markets, one may need to measure credit risk, information timing and source risk, probability model risk, and legal risk if there are regulatory or civil actions taken as a result of some "investor's regret".

    "A fundamental idea in finance is the relationship between risk and return. The greater the amount of risk that an investor is willing to take on, the greater the potential return. The reason for this is that investors need to be compensated for taking on additional risk."

    "For example, a US Treasury bond is considered to be one of the safest investments and, when compared to a corporate bond, provides a lower rate of return. The reason for this is that a corporation is much more likely to go bankrupt than the U.S. government. Because the risk of investing in a corporate bond is higher, investors are offered a higher rate of return."

    In public works In a peer reviewed study of risk in public works projects located in twenty nations on five continents, Flyvbjerg, Holm, and Buhl (2002, 2005) documented high risks for such ventures for both costs and demand . Actual costs of projects were typically higher than estimated costs; cost overruns of 50% were common, overruns above 100% not uncommon. Actual demand was often lower than estimated; demand shortfalls of 25% were common, of 50% not uncommon.

    Due to such cost and demand risks, cost-benefit analyses of public works projects have proved to be highly uncertain.

    The main causes of cost and demand risks were found to be optimism bias and strategic misrepresentation. Measures identified to mitigate this type of risk are better governance through incentive alignment and the use of reference class forecasting .

    Risk in psychology Regret In decision theory, regret (and anticipation of regret) can play a significant part in decision-making, distinct from risk aversion (preferring the status quo in case one becomes worse off).

    Framing Framing is a fundamental problem with all forms of risk assessment. 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. As an example, one of the leading causes of death is road accidents caused by Driving under the influence—partly because any given driver frames the problem by largely or totally ignoring the risk of a serious or fatal accident.

    The above examples (body, threat, price of life, professional ethics and regret) show that the risk adjustor or assessor often faces serious conflicts of interest. The assessor also faces cognitive bias and cultural bias and cannot always be trusted to avoid all moral hazards. This represents a risk in itself, which grows as the assessor is less like the client.

    For instance, an extremely disturbing event that all participants wish not to happen again may be ignored in analysis despite the fact it has occurred and has a nonzero probability. Or, an event that everyone agrees is inevitable may be ruled out of analysis due to greed or an unwillingness to admit that it is believed to be inevitable. These human tendencies to 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. But all Decision theory#Choice under uncertainty must consider cognitive bias, cultural bias, and notational bias: No group of people assessing risk is immune to "groupthink": acceptance of obviously wrong answers simply because it is socially painful to disagree.

    One effective way to solve framing problems in risk assessment or measurement (although some argue that risk cannot be measured, only assessed) is to ensure that scenarios, as a strict rule, must include unpopular and perhaps unbelievable (to the group) high-impact low-probability "threat" and/or "vision" events. This permits participants in risk assessment to raise others' fears or personal ideals by way of completeness, without others concluding that they have done so for any reason other than satisfying this formal requirement.

    For example, an intelligence analyst with a scenario for an attack by hijacking might have been able to insert mitigation for this threat into the U.S. budget. It would be admitted as a formal risk with a nominal low probability. This would permit coping with threats even though the threats were dismissed by the analyst's superiors. Even small investments in diligence on this matter might have disrupted or prevented the attack—or at least "hedged" against the risk that an administration might be mistaken.

    Fear as intuitive risk assessment For the time being, people rely on their fear and hesitation to keep them out of the most profoundly unknown circumstances.

    In The Gift of Fear, Gavin de Becker argues that "True fear is a gift. It is a survival signal that sounds only in the presence of danger. Yet unwarranted fear has assumed a power over us that it holds over no other creature on Earth. It need not be this way."

    Risk could be said to be the way we collectively measure and share this "true fear"—a fusion of rational doubt, irrational fear, and a set of unquantified biases from our own experience.

    The field of behavioral finance focuses on human risk-aversion, asymmetric regret, and other ways that human financial behavior varies from what analysts call "rational". Risk in that case is the degree of uncertainty associated with a return (finance) on an asset.

    Recognizing and respecting the irrational influences on human decision making may do much to reduce disasters caused by naive risk assessments that pretend to rationality but in fact merely fuse many shared biases together.

    Risk in auditing The audit risk model can be analytically expressed as:

    ::::::::::AR = IR x CR x DR

    Where AR is audit risk, IR is inherent risk, and DR is detection risk.

    See also



    References Articles & Papers

    Books Historian David A. Moss's book When All Else Fails explains the U.S. government's historical role as risk manager of last resort.
    Peter L. Bernstien. Against the Gods ISBN 0-471-29563-9. Risk explained and its appreciation by man traced from earliest times through all the major figures of their ages in mathematical circles.
    {{cite book | last = Porteous | first = Bruce T. | coauthors = Pradip Tapadar | title = Economic Capital and Financial Risk Management for Financial Services Firms and Conglomerates | publisher = Palgrave Macmillan | date = 2005 | month = December | id = ISBN 1-4039-3608-0 -->

    Magazines

    Journals

    Societies



    External links

    For the Parker Brothers board game, see risk (game)

    Risk is a concept that denotes a potential negative impact to an asset or some characteristic of Value (economics) that may arise from some present process (general) or future event (probability theory).In everyday usage, risk is often used synonymously with the probability of a known loss.Paradoxically, a probable loss can be uncertain and relative in an individual event while having a certainty in the aggregate of multiple events (see risk vs. uncertainty below).

    Risk is the possibility of an event occurring that will have an impact on the achievement of objectives. Risk is measured in terms of impact and likelihood.http://www.theiia.org/guidance/standards-and-practices/professional-practices-framework/standards/standards-for-the-professional-practice-of-internal-auditing/?search=glossary&C=816&I=2343

    Risk communication and risk perception are essential factors for all human decision making.

    Definitions of risk There are many more and less precise definitions of risk; they depend on specific applications and situational contexts.It can be assessed qualitatively or quantitatively.

    Qualitatively, risk is considered proportional to the expected losses which can be caused by an event and to the probability of this event. The harsher the loss and the more likely the event, the greater the overall risk.

    Frequently in the subject matter literature, risk is defined in pseudo-formal forms where the components of the definition are vagueand ill-defined, for example, risk is considered as an indicator of Wiktionary:threat, or depends on threats, vulnerability, impact and uncertainty.

    In engineering, the quantitative engineering definition of risk is:

    Risk = {(probability\ of\ an\ accident)} \times {(losses\ per\ accident)} .

    Independently, on the wide use this definition, for example in nuclear energy and other potentially dangerous industries, measuring engineering risk is often difficult; the probability is assessed by the frequency of the past similar events (or by event-tree methods), but rare failures are hard to estimate if an event tree cannot be formulated, and loss of human life is generally considered beyond estimation —however, radiological release (e.g., GBq of radio-iodine) is usually used as a surrogate.There are many formal methods used to assess or to "measure" risk, considered as one of the critical indicators important for human decision making.

    Financial risk is often defined as the unexpected variability or Volatility (finance) of returns and thus includes both potential worse-than-expected as well as better-than-expected returns. References to negative risk below should be read as applying to positive impacts or opportunity (e.g., for "loss" read "loss or gain") unless the context precludes.

    In statistics, risk is often mapped to the probability of some event which is seen as undesirable. Usually, the probability of that event and some assessment of its expected harm must be combined into a believable scenario (an outcome), which combines the set of risk, regret and reward probabilities into an expected value for that outcome. (See also Expected utility.)

    Thus, in decision theory, the risk function of an estimator δ(x) for a parameter θ, calculated from some observables x, is defined as the expectation value of the loss function L,

    R(\theta,\delta(x)) = \int L(\theta,\delta(x))\times f(x|\theta)\,dx

    In information security , a risk is defined as a function of three variables:
  • the probability that there is a threat
  • the probability that there are any vulnerability
  • the potential impact.


    • If any of these variables approaches zero, the overall risk approaches zero.

    The management of actuarial risk is called risk management.

    Historical background Scenario analysis matured during Cold War confrontations between major powers, notably the United States and the Soviet Union. It became widespread in insurance circles in the 1970s when major oil spill forced a more comprehensive foresight. The scientific approach to risk entered finance in the 1980s when derivative (finance) proliferated. It reached general professions in the 1990s when the power of personal computing allowed for widespread data collection and numbers crunching.

    Governments are apparently only now learning to use sophisticated risk methods, most obviously to set standards for environmental regulation, e.g. "pathway analysis" as practiced by the United States Environmental Protection Agency.

    Risk vs. uncertainty In his seminal work Risk, Uncertainty, and Profit, Frank Knight (1921) established the distinction between risk and uncertainty.

    Insurance and health risk Insurance is a risk-reducing investment in which the buyer pays a small fixed amount to be protected from a potential large loss. Gambling is a risk-increasing investment, wherein money on hand is risked for a possible large return, but with the possibility of losing it all. Purchasing a lottery ticket is a very risky investment with a high chance of no return and a small chance of a very high return. In contrast, putting money in a bank at a defined rate of interest is a risk-averse action that gives a guaranteed return of a small gain and precludes other investments with possibly higher gain.

    Risks in personal health may be reduced by primary prevention actions that decrease early causes of illness or by secondary prevention actions after a person has clearly measured clinical signs or symptoms recognized as risk factors. Tertiary prevention (medical) reduces the negative impact of an already established disease by restoring function and reducing disease-related complications. Ethical medical practice requires careful discussion of risk factors with individual patients to obtain informed consent for secondary and tertiary prevention efforts, whereas public health efforts in primary prevention require education of the entire population at risk. In each case, careful communication about risk factors, likely outcomes and certainty must distinguish between causal events that must be decreased and associated events that may be merely consequences rather than causes.

    Economic risk Insight The central insight in the methodology for incorporating economic risks arise from the realization of the fact that however manifold and diverse might be the causes, or factors, of risks around a specific project or business (for instance, the hike in the price for raw materials, the lapsing of deadlines for construction of a new operating facility, disruptions in a production process, emergence of a serious competitor on the market, the loss of key personnel, the change of a political regime, natural contingencies, etc.), all of these are ultimately manifested under only two guises. According to CCF Conception the economic risk consists in that: Actual positive conventional cash flows (income, inflows) turn out to be less than expected AND / OR Actual negative conventional cash flows (expenditures, outflows) turn out to be larger than expected (in absolute terms).

    Such lucid and unambiguous conceptual treatment of such a complex and multi-faceted notion as the economic risk emphasizes the very core of the question. The economic risk is not an abstract ‘uncertainty’ or ‘possibility of failure’ or changeableness (variability) of the outcome… The economic risk – is a monetary amount which might be under-collected and/or over-paid. Just as in music, one must use musical notes and staves—not alphabet letters or colors—to render a melody, in describing economic risk, we must ultimately operate with monetary units and not with the percentages of discount rates, magnitudes of volatility or anything else.(See .)

    In business Means of assessing risk vary widely between professions. Indeed, they may define these professions; for example, a doctor manages medical risk, while a civil engineer manages risk of structural failure. A professional code of ethics is usually focused on risk assessment and mitigation (by the professional on behalf of client, public, society or life in general).

    In the workplace, incidental and inherent risks exist. Incidental risks are those which occur naturally in the business but are not part of the core of the business. Inherent risks have a negative effect on the operating profit of the business.

    Criticism Criticism has been leveled at the amoral ("rational") application of quantitative risk assessment.

    Risk-sensitive industries Some industries manage risk in a highly quantified and numerate way. These include the nuclear power and Aerospace manufacturer, where the possible failure of a complex series of engineered systems could result in highly undesirable outcomes. The usual measure of risk for a class of events is then, where P is probability and C is consequence:

    R = P (\mbox{of the Event}) \times C

    The total risk is then the sum of the individual class-risks.

    In the nuclear industry, consequence is often measured in terms of off-site radiological release, and this is often banded into five or six decade-wide bands.
    .

    The risks are evaluated using fault tree/event tree techniques (see safety engineering). Where these risks are low, they are normally considered to be "Broadly Acceptable". A higher level of risk (typically up to 10 to 100 times what is considered Broadly Acceptable) has to be justified against the costs of reducing it further and the possible benefits that make it tolerable—these risks are described as "Tolerable if ALARP". Risks beyond this level are classified as "Intolerable".

    The level of risk deemed Broadly Acceptable has been considered by regulatory bodies in various countries—an early attempt by UK government regulator and academic F. R. Farmer used the example of hill-walking and similar activities which have definable risks that people appear to find acceptable. This resulted in the so-called Farmer Curve of acceptable probability of an event versus its consequence.

    The technique as a whole is usually referred to as Probabilistic Risk Assessment (PRA) (or Probabilistic Safety Assessment, PSA). See WASH-1400 for an example of this approach.

    In finance In finance, risk is the probability that an investment's actual return will be different than expected. This includes the possibility of losing some or all of the original investment. It is usually measured by calculating the standard deviation of the historical returns or average returns of a specific investment.

    In finance, risk has no one definition, but some theorists, notably Ron Dembo, have defined quite general methods to assess risk as an expected after-the-fact level of regret. Such methods have been uniquely successful in limiting interest rate risk in financial markets. Financial markets are considered to be a proving ground for general methods of risk assessment.

    However, these methods are also hard to understand. The mathematical difficulties interfere with other social goods such as disclosure, valuation and transparency (humanities). In particular, it is often difficult to tell if such financial instruments are "hedging" (purchasing/selling a financial instrument specifically to reduce or cancel out the risk in another investment) or "gambling" (increasing measurable risk and exposing the investor to catastrophic loss in pursuit of very high windfalls that increase expected value).

    As regret measures rarely reflect actual human risk-aversion, it is difficult to determine if the outcomes of such transactions will be satisfactory. Risk seeking describes an individual whose utility function's second derivative is positive. Such an individual would willingly (actually pay a premium to) assume all risk in the economy and is hence not likely to exist.

    In financial markets, one may need to measure credit risk, information timing and source risk, probability model risk, and legal risk if there are regulatory or civil actions taken as a result of some "investor's regret".

    "A fundamental idea in finance is the relationship between risk and return. The greater the amount of risk that an investor is willing to take on, the greater the potential return. The reason for this is that investors need to be compensated for taking on additional risk."

    "For example, a US Treasury bond is considered to be one of the safest investments and, when compared to a corporate bond, provides a lower rate of return. The reason for this is that a corporation is much more likely to go bankrupt than the U.S. government. Because the risk of investing in a corporate bond is higher, investors are offered a higher rate of return."

    In public works In a peer reviewed study of risk in public works projects located in twenty nations on five continents, Flyvbjerg, Holm, and Buhl (2002, 2005) documented high risks for such ventures for both costs and demand . Actual costs of projects were typically higher than estimated costs; cost overruns of 50% were common, overruns above 100% not uncommon. Actual demand was often lower than estimated; demand shortfalls of 25% were common, of 50% not uncommon.

    Due to such cost and demand risks, cost-benefit analyses of public works projects have proved to be highly uncertain.

    The main causes of cost and demand risks were found to be optimism bias and strategic misrepresentation. Measures identified to mitigate this type of risk are better governance through incentive alignment and the use of reference class forecasting .

    Risk in psychology Regret In decision theory, regret (and anticipation of regret) can play a significant part in decision-making, distinct from risk aversion (preferring the status quo in case one becomes worse off).

    Framing Framing is a fundamental problem with all forms of risk assessment. 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. As an example, one of the leading causes of death is road accidents caused by Driving under the influence—partly because any given driver frames the problem by largely or totally ignoring the risk of a serious or fatal accident.

    The above examples (body, threat, price of life, professional ethics and regret) show that the risk adjustor or assessor often faces serious conflicts of interest. The assessor also faces cognitive bias and cultural bias and cannot always be trusted to avoid all moral hazards. This represents a risk in itself, which grows as the assessor is less like the client.

    For instance, an extremely disturbing event that all participants wish not to happen again may be ignored in analysis despite the fact it has occurred and has a nonzero probability. Or, an event that everyone agrees is inevitable may be ruled out of analysis due to greed or an unwillingness to admit that it is believed to be inevitable. These human tendencies to 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. But all Decision theory#Choice under uncertainty must consider cognitive bias, cultural bias, and notational bias: No group of people assessing risk is immune to "groupthink": acceptance of obviously wrong answers simply because it is socially painful to disagree.

    One effective way to solve framing problems in risk assessment or measurement (although some argue that risk cannot be measured, only assessed) is to ensure that scenarios, as a strict rule, must include unpopular and perhaps unbelievable (to the group) high-impact low-probability "threat" and/or "vision" events. This permits participants in risk assessment to raise others' fears or personal ideals by way of completeness, without others concluding that they have done so for any reason other than satisfying this formal requirement.

    For example, an intelligence analyst with a scenario for an attack by hijacking might have been able to insert mitigation for this threat into the U.S. budget. It would be admitted as a formal risk with a nominal low probability. This would permit coping with threats even though the threats were dismissed by the analyst's superiors. Even small investments in diligence on this matter might have disrupted or prevented the attack—or at least "hedged" against the risk that an administration might be mistaken.

    Fear as intuitive risk assessment For the time being, people rely on their fear and hesitation to keep them out of the most profoundly unknown circumstances.

    In The Gift of Fear, Gavin de Becker argues that "True fear is a gift. It is a survival signal that sounds only in the presence of danger. Yet unwarranted fear has assumed a power over us that it holds over no other creature on Earth. It need not be this way."

    Risk could be said to be the way we collectively measure and share this "true fear"—a fusion of rational doubt, irrational fear, and a set of unquantified biases from our own experience.

    The field of behavioral finance focuses on human risk-aversion, asymmetric regret, and other ways that human financial behavior varies from what analysts call "rational". Risk in that case is the degree of uncertainty associated with a return (finance) on an asset.

    Recognizing and respecting the irrational influences on human decision making may do much to reduce disasters caused by naive risk assessments that pretend to rationality but in fact merely fuse many shared biases together.

    Risk in auditing The audit risk model can be analytically expressed as:

    ::::::::::AR = IR x CR x DR

    Where AR is audit risk, IR is inherent risk, and DR is detection risk.

    See also



    References Articles & Papers

    Books Historian David A. Moss's book When All Else Fails explains the U.S. government's historical role as risk manager of last resort.
    Peter L. Bernstien. Against the Gods ISBN 0-471-29563-9. Risk explained and its appreciation by man traced from earliest times through all the major figures of their ages in mathematical circles.
    {{cite book | last = Porteous | first = Bruce T. | coauthors = Pradip Tapadar | title = Economic Capital and Financial Risk Management for Financial Services Firms and Conglomerates | publisher = Palgrave Macmillan | date = 2005 | month = December | id = ISBN 1-4039-3608-0 -->

    Magazines

    Journals

    Societies



    External links



    Risk management, derivatives, structured products | Risk magazine
    News, articles, technical papers, books, rankings and surveys on financial risk management, derivatives, structured products, Risk is the world's leading financial risk management ...

    Risk magazine - SG moves on
    News, articles, technical papers, books, rankings and surveys on financial risk management, derivatives, structured products, Risk is the world's leading financial risk management ...

    Risk management: Example risk assessments: case study
    HSE sets out example risk assessments to help you see what a risk assessment might look like. ... Example risk assessments. So, you’re going to do a risk assessment for your ...

    Risk management: Frequently asked questions
    Frquently asked questions on related risk management topics. ... Frequently asked questions Definitions. What is a hazard? What is risk? What is risk management? What is risk ...

    Risk Waters Group
    The Risk Waters Group is now part of Incisive Media Plc. If you are not redirected to our new corporate home pages www.incisivemedia.com click here

    Risk Jobs - Operational, Market & Credit Risk Jobs - Joslin Rowe
    Find Risk jobs and a range of risk jobs with Joslin Rowe, the uk recruitment consultants specialising in uk risk jobs, with a range of recruitment opportunities in the ... ...

    Amazon.co.uk: Risk: John Adams: Books
    Amazon.co.uk: Risk: John Adams: Books ... Paperback: 228 pages; Publisher: UCL press; first edition edition (16 Feb 1995) Language English; ISBN-10: 1857280687; ISBN-13: 978 ...

    Cancer Research UK : Raising awareness of the avoidable risks ...
    Cancer Research UK's Reduce the Risk campaign tells you how healthy lifestyle changes can reduce your risk of cancer.

    Risk management, derivatives, structured products | Risk magazine
    Latest news on people, markets and technology from the financial risk management and global derivatives markets

    MPS Risk Consulting | Welcome to MPS Risk Consulting
    Helps healthcare professionals handle clinical risk, provides training and consultancy in primary and secondary care. Part of the Medical Protection Society.

     

    Risk



     
    Copyright © 2008 Hintcenter.com - All rights reserved.
    Home | Terms of Use | Privacy Policy
    All Trademarks belong to their repective owners. Many aspects of this page are used under
    commercial commons license from Yahoo!