In many risky situations, the possible outcomes can be classified either as losses or gains. People normally consider the downside possibility of losses to be risk, not the upside potential for a gain. There are situations in which there is no obvious downside or upside Risk aversion is a characteristic of an individual’s preferences in risk-taking situations. It is a measure of willingness to pay to reduce one’s exposure to risk. The process of formulating the benefit-cost trade offs of risk reduction and deciding on the course of action to take (including the decision to take no action at all) is called risk management All decisions made with respect to uncertainty must be made before that uncertainty is resolved. What matters is that the decision is the best one could make based on available information
Uncertainty exists whenever one does not know for sure what will occur in the future.
A situation or condition of having no protection from something harmful where it might affect you.
Risk is uncertainty that matters because it affects people’s welfare
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