On the definition of risk

Filipe Lemos
Additional contact information
Filipe Lemos: Risk Manager, Risk Management, BNI Europa

Journal of Risk Management in Financial Institutions, 2020, vol. 13, issue 3, 266-278

Abstract: This paper aims to build, through the collection of inputs from prior research, regulatory input and practitioner’s experience, a comprehensive definition of risk. Risk is not measurable uncertainty or volatility. Risk is a three-part concept: (1) risk is the potential that events may have an unexpected and noteworthy impact on results, ie a consequence of exposure while pursuing objectives in an uncertain environment; (2) risk is ontological uncertainty, the unknown unknown; and (3) risk is the perception of expected utility, as how risk is individually perceived and socially amplified influences its experience and subsequent effects. So, the challenge is to deal with risk by understanding the impossibility of predicting the future. One should learn from the past but simultaneously accept that not all past lessons address every issue coming our way.

Keywords: risk; uncertainty; exposure; probabilities; normal distribution; black swan; complexity theory; perception; amplification (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://hstalks.com/article/5659/download/ (application/pdf)
https://hstalks.com/article/5659/ (text/html)
Requires a paid subscription for full access.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aza:rmfi00:y:2020:v:13:i:3:p:266-278

Access Statistics for this article

More articles in Journal of Risk Management in Financial Institutions from Henry Stewart Publications
Bibliographic data for series maintained by Henry Stewart Talks ().