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Risk From Wikipedia, the free encyclopedia This article is in need of attention from anexpert on the subject. Please help recruit one or improve this article yourself. See the talk page for details. Please consider using {{Expert-subject}} to associate this request with aWikiProject.For other uses, see Risk (disambiguation)."Risk-takers" redirects here. For the Canadian television program, see Risk Takers.Risk is a concept that denotes the precise probability of specific eventualities.Technically, the notion of risk is independent from the notion of value and, as such,eventualities may have both beneficial and adverse consequences. However, in generalusage the convention is to focus only on potential negative impact to some characteristicof value that may arise from a future event.Contents [hide]1 Historical background2 Definitions of risk 2.1 Risk versus uncertainty3 Insurance and health risk 4 Economic risk 4.1 Insight4.2 In business4.3 Criticism4.4 Risk-sensitive industries4.4.1 In finance4.5 In public works4.6 In human services5 Risk in psychology5.1 Regret5.2 Framing5.3 Fear as intuitive risk assessment6 Root causes of risk 7 Risk assessment and management8 Risk in auditing9 Categories of risks10 See also11 References12 Bibliography12.1 Referred literature12.2 Books12.3 Articles and papers13 External links13.1 Further reading13.2 Magazines and journals13.3 Societies

[edit]Historical backgroundThe term risk only emerged in the modernity. "In the Middle Ages the term riscium wasused in highly specific contexts, above all sea trade and its ensuing legal problems of lossand damage."[1] In the vernacular languages of the 16th century the words rischio andriezgo were used.[1] In the English language the term risk appeared only in the 17thcentury, and "seems to be imported from continental Europe."[1] When the terminologyof risk took ground, it replaced the older notion that though "in terms of good and badfortune."[1] Niklas Luhmann (1996) seeks to explain this transition: "Perhaps, this wassimply a loss of plausibility of the old rhetorics of Fortuna as an allegorical figure of religious content and of prudentia as a (noble) virtue in the emerging commercialsociety."[2]Scenario analysis matured during Cold War confrontations between major powers,notably the U.S. and the USSR. It became widespread in insurance circles in the 1970swhen major oil tanker disasters forced a more comprehensive foresight.[citation needed]The scientific approach to risk entered finance in the 1980s when financial derivatives proliferated. It reached general professions in the 1990s when the power of personalcomputing allowed for widespread data collection and numbers crunching.Governments are using it, for example, to set standards for environmental regulation, e.g."pathway analysis" as practiced by the United States Environmental Protection Agency.[edit]Definitions of risk There are many definitions of risk that vary by specific application and situationalcontext. One is that risk is an issue, which can be avoided or mitigated (wherein an issueis a potential problem that has to be fixed now.) Risk is described both qualitatively andquantitatively. In some texts risk is described as a situation which would lead to negativeconsequences.Qualitatively, risk is proportional to both the expected losses which may be caused by anevent and to the probability of this event. Greater loss and greater event likelihood resultin a greater overall risk.Frequently in the subject matter literature, risk is defined in pseudo-formal forms wherethe components of the definition are vague and ill-defined, for example, risk isconsidered as an indicator of threat, or depends on threats, vulnerability, impact anduncertainty.[citation needed]In engineering, the definition risk often simply is:Or in more general terms:

One of the first major uses of this concept was at the planning of the Delta Works in1953, a flood protection program in the Netherlands, with the aid of the mathematicianDavid van Dantzig.[3] The kind of risk analysis pioneered here has become commontoday in fields like nuclear power, aerospace and chemical industry.There are more sophisticated definitions, however. Measuring engineering risk is oftendifficult, especially in potentially dangerous industries such as nuclear energy. Often, the probability of a negative event is estimated by using the frequency of past similar eventsor by event-tree methods, but probabilities for rare failures may be difficult to estimate if an event tree cannot be formulated. Methods to calculate the cost of the loss of humanlife vary depending on the purpose of the calculation. Specific methods include what people are willing to pay to insure against death,[4] and radiological release (e.g., GBq of radio-iodine).[citation needed] There are many formal methods used to assess or to"measure" risk, considered as one of the critical indicators important for human decisionmaking.Financial risk is often defined as the unexpected variability or volatility of returns andthus 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 asundesirable. Usually, the probability of that event and some assessment of its expectedharm must be combined into a believable scenario (an outcome), which combines the setof risk, regret and reward probabilities into an expected value for that outcome. (See alsoExpected utility.)Thus, in statistical 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 lossfunction L,In information security[citation needed], a risk is written as an asset, the threats to theasset and the vulnerability that can be exploited by the threats to impact the asset - anexample being: Our desktop computers (asset) can be compromised by malware (threat)entering the environment as an email attachment (vulnerability).The risk is then assessed as a function of three variables:the probability that there is a threatthe probability that there are any vulnerabilitiesthe potential impact to the business.The two probabilities are sometimes combined and are also known as likelihood. If anyof these variables approaches zero, the overall risk approaches zero.