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Common Perceptions of Risk

6/29/2018

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Consider the definition of risk from the Merriam-Webster Online Dictionary:

risk
  1. possibility of loss or injury
  2. someone or something that creates or suggests a hazard
  3. a: the chance of loss or the perils to the subject matter of an insurance contract; also: the degree of probability of such loss b: a person or thing that is a specified hazard to an insurer c: an insurance hazard from a specified cause or source
  4. the chance that an investment (as a stock or commodity) will lose value

Is it any wonder that many of us have a conflicted relationship with risk and risk-taking?  Look at these definitions.  They are uniformly negative.  The thought that a risk could have a positive outcome is entirely absent.
  • Couldn’t the first definition read:  possibility of loss, injury, success or accomplishment and indeed be accurate?
  • Wouldn’t the fourth definition be more accurate if it read:  the chance that an investment (as a stock or commodity) will lose or gain value?  Certainly an investor, entrepreneur or company does not put capital at risk unless there is a reasonable chance of an increase in value.

​This definition illustrates the common societal bias against taking risks – even thoughtful, intelligent ones.
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    Jim McCormick

    ​Founder and President Research Institute for Risk Intelligence

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