What is your definition of risk

risk

1. Traditional interpretation: danger or possibility of a wrong decision due to human error and / or incomplete information.
2. Modern interpretation: deviation of the actual result from the expected result. Since the result deviation can be positive or negative from the perspective of the person concerned, the neutral interpretation of the risk as a danger, which is at the same time connected with an opposing opportunity, is receiving increasing attention.

The risk is traditionally understood as the danger of a possible positive or negative deviation of a future realized economic value from an expected value. Risks can be measured, for example, with the help of the variance or the standard deviation. In another perspective, risk is only understood as a possible negative deviation of a future realized economic value from an expected value (downside risk).


General: Any risk of loss associated with an economic activity can be described as a risk in the economic sense (broad term). It can be both the effective loss of capital employed and the failure to exploit possible advantages (loss of opportunity). Risk in the narrower sense is only spoken of when there are objective notions of probability about the occurrence of events. Effects of the risk on the cost accounting: The cost planning has to take the risk into account in the approach of the planned costs. The calculable risks that can be determined by the theory of probability are taken into account in the imputed risk costs. The general, incalculable company risk is compensated in the entrepreneurial profit.

There is a risk when incomplete information about a decision-making situation is given. Since not all the necessary information is available, it is possible to judge the occurrence of expectations with the help of objective probabilities. Risks in the sense of daring and dangers can often arise in the operational process due to the nature of the production factors; For example, a lack of care and carelessness can destroy mechanical systems or produce rejects.

Also: danger, risk. Future-oriented decisions in the bank have in common that they must be made under uncertainty, as there is a priori lack of reliable knowledge about future developments relevant to the decision-making process. Following a decision-theoretical understanding of the concept of risk in relation to such decision-making situations in which there is uncertainty about future events and developments on the one hand, but in which the decision-maker has a (subjective) probability distribution regarding future developments on the other. Risk can be understood further: 1. planning-oriented as the non-realization of planned target values, 2. decision-related as the possibility of a wrong decision, 3. loss-related as the risk of loss of assets or 4. goal-oriented as the risk of not achieving a desired goal. If one understands risk as the possibility of a deviation of the actual consequences of a decision from the planned consequences, then there is fundamentally. the possibility of a positive or a negative discrepancy. While the former is often seen as an opportunity, the latter can be understood as a risk in the narrower sense. The one-sided consideration of the unfavorable deviation of the results is characteristic of the risk concept commonly used in practice.

Risk situation

(A) (general definition) describes the uncertainty of the realization of an observed variable depending on the occurrence of various future environmental conditions. In contrast to the uncertainty, the probabilities of occurrence of the possible states are known reliably and objectively. Risk can be quantified using what is known as the risk measure. See also risk analysis, analysis methods, business management and risk controlling (with references). (B) (general definition) is the deviation of the actual value of a predicted variable (e.g. profit) from a reference value (e.g. from zero profit, from expected profit). The negative deviation (risk of loss) is also referred to as risk in the sense of the word. The positive deviation is called an opportunity. See also risk analysis, analysis methods, business management and risk controlling (with references). (C) (especially in foreign trade). The risk represents the risk of loss associated with any economic activity. In foreign trade in particular, general economic risks such as payment risk (del credere risk) and specific foreign trade risks such as currency risk are hidden due to changing or even unknown framework conditions and the large distances between trading partners. In order to avoid a threat to the existence of such risks, the companies concerned use instruments such as advance payments, documentary payment terms, credit insurance, forward exchange transactions, transport insurance and bank guarantees in an adapted risk management system. See also foreign trade finance and currency management, each with references.

Previous technical term: Risk-Opportunity Analysis | Next technical term: risk management



Report this article to the editors as incorrect & mark it for editing