Definition of risk
Risk refers to the possibility that human actions or events lead to consequences
that affect aspects of what humans’ value (Fischhoff et al. 1984, Vlek 1996).
Risk analysis is both a descriptive and a normative concept. It includes the
analysis of cause-effect relationships, but it also signal implicitly to reduce undesirable
effects through either appropriate modification of the causes or,
though less desirable, mitigation of the consequences.
2.2. Distinction between risk and uncertainty
While risk generally refers to the possibility of suffering harm or a loss, in engineering
and the physical sciences, for example, the term “risk” is taken to be
probability multiplied with consequences. In psychology, risk is rather seen as a
function of subjectively perceived utilities and probabilities of their occurrence
(See. e.g., Slovic et al., 2004). But in decision making theory risk has yet another
meaning, and most be distinguished from uncertainty and ignorance. Decision
making under risk implies that all consequences of any action/decision is
known, i.e. a value attached to it and a probability distribution over possibly
consequences is known. Table 1 shows terms and implications. Broader, uncertainty
refers to the incompleteness of knowledge about the states or processes in
nature.