What Is Risk? - Financial-Student.eu.org
Financial-Student - Risk is a part and parcel of our daily lives. Risks are all around us whether we are aware of them or not. We may be familiar with some of the risks and then there are others , which may have escaped our attention. There are risks , which we have learned to live with such as “Will I live to see this year through” and than there are risks , which do not cross the mind like “The possibility of house or property getting damaged by an earthquake or lightening”.
For example: Whenever we go out of your house the parents are worried that the possibility of accident on roads. Risk of accident is involved.
As & when we go to attend marriage of your relative out of town along with your family members and we lock your house and your parents always feel risk of theft.
Risk has been defined as the possibility of occurrence of an unfavourable deviation from the expected i.e. what we want to happen does not happen or vice versa what we do not want to happen , happens. When such unexpected events occur there is invariably a sense of loss , which may or may not be measurable in terms of money. When your vehicle gets unexpectedly stolen there is a monitory loss but if your Favourite pet dies unexpectedly we feel a great loss but this loss is not measurable. Since an unfavourable deviation from the expected always results in loss , we can also define risk as the possibility of occurrence of loss.
Our expectations are mostly positive. We expect our car to be exactly where it was parked in the same condition as when we left it and are unpleasantly surprised if we find it is not there or that it has been damaged when we return. Once we realize that our expectations are less than certain and that actual events may differ from what we expected , uncertainty creeps into the mind and uncertainty is something , which most people are not comfortable with.
The knowledge of risk and its potential to cause loss creates uncertainty and gives rise to a feeling of insecurity which leads to worry amongst people and once they are worried enough they will give the problem some thought and try to find a solution , and this is where Insurance comes in.
A man is aware that he may die unexpectedly and is worried that in case such an event does happen his family will have to face a lot of hardship and so to mitigate his worry he goes in for life Insurance. Another person may be aware that there is a possibility of his vehicle meeting with an accident and is worried that he may not be in a position to afford its replacement or repair therefore he opts for Motor Insurance. Insurance provides a means for reducing the adverse impact of unexpected losses and lessen the worry factor letting a person breathe more easy.
Worry , insecurity and uncertainty are all very negative factors , which adversely affect the output or performance of individuals or even business houses.
A worker who is insecure in his job and is worried by this insecurity will be less productive than his counterpart who is secure. Worry not only leads to reduced production resulting in higher cost but it can also be the cause of accidents as worried workers are more likely to be careless than those who are concentrating on their duties.
Even Business houses when they are uncertain about the future may not be willing to invest more.
Thuѕ wе ѕее thаt Rіѕk wіth іtѕ rеѕultаntѕ unсеrtаіntу , іnѕесurіtу аnd wоrrу dеfіnіtеlу hаvе аn есоnоmіс аnd а рѕусhоlоgісаl соѕt.
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For example: Whenever we go out of your house the parents are worried that the possibility of accident on roads. Risk of accident is involved.
As & when we go to attend marriage of your relative out of town along with your family members and we lock your house and your parents always feel risk of theft.
Risk has been defined as the possibility of occurrence of an unfavourable deviation from the expected i.e. what we want to happen does not happen or vice versa what we do not want to happen , happens. When such unexpected events occur there is invariably a sense of loss , which may or may not be measurable in terms of money. When your vehicle gets unexpectedly stolen there is a monitory loss but if your Favourite pet dies unexpectedly we feel a great loss but this loss is not measurable. Since an unfavourable deviation from the expected always results in loss , we can also define risk as the possibility of occurrence of loss.
Our expectations are mostly positive. We expect our car to be exactly where it was parked in the same condition as when we left it and are unpleasantly surprised if we find it is not there or that it has been damaged when we return. Once we realize that our expectations are less than certain and that actual events may differ from what we expected , uncertainty creeps into the mind and uncertainty is something , which most people are not comfortable with.
The knowledge of risk and its potential to cause loss creates uncertainty and gives rise to a feeling of insecurity which leads to worry amongst people and once they are worried enough they will give the problem some thought and try to find a solution , and this is where Insurance comes in.
A man is aware that he may die unexpectedly and is worried that in case such an event does happen his family will have to face a lot of hardship and so to mitigate his worry he goes in for life Insurance. Another person may be aware that there is a possibility of his vehicle meeting with an accident and is worried that he may not be in a position to afford its replacement or repair therefore he opts for Motor Insurance. Insurance provides a means for reducing the adverse impact of unexpected losses and lessen the worry factor letting a person breathe more easy.
Worry , insecurity and uncertainty are all very negative factors , which adversely affect the output or performance of individuals or even business houses.
A worker who is insecure in his job and is worried by this insecurity will be less productive than his counterpart who is secure. Worry not only leads to reduced production resulting in higher cost but it can also be the cause of accidents as worried workers are more likely to be careless than those who are concentrating on their duties.
Even Business houses when they are uncertain about the future may not be willing to invest more.
Thuѕ wе ѕее thаt Rіѕk wіth іtѕ rеѕultаntѕ unсеrtаіntу , іnѕесurіtу аnd wоrrу dеfіnіtеlу hаvе аn есоnоmіс аnd а рѕусhоlоgісаl соѕt.
