DEFINITIONS OF RISK

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DEFINITIONS OF RISK

1. "Risk is defmed as Wlcertainty as to a loss."1 Hmm! Doesn't sOWld
quite the same as the dictionary definition. Maybe insurance people use
"risk" in a very technical sense to mean something different from the
dictionary definition.
2. "Risk is uncertainty of financial loss. "2
3. "Risk is defined as uncertainty concerning the occurrence of a loss.3
4. "For our purpose the term risk usually refers to perils to which the
individual is objectively exposed at any time."4 Joe's confidence in his
understanding of risk now is a bit shaken.
5. "Risk is defined as the variation in the outcomes that could occur over
a specified period. If only one outcome is possible, the variation and
hence the risk is zero. If many outcomes are possible the risk is not
null. "5 Joe notes that there is nothing "objective" about risk in this
definition and his uncertainty (risk?) mounts.
6. "The lack of predictability of outcomes may be termed risk. Risk in
this sense, does not imply that outcome are adverse, only that they are not
known in advance"6 and the author indicates in his text that it is a
"temporary definition of risk".
7. "Risk is a state in which losses are possible... Risk has no meaning
without loss being the outcome of concern. "7 Joe is starting to panic now.
8. "Risk is a condition in which there is a possibility of an adverse
deviation from a desired outcome that is expected or hoped for."8 Sounds
plausible, but man! I'm confused.
If Joe College were to look further into texts on risk and insurance,
he would find that risk is also defined as a chance of loss or a
combination of hazards. Joe's next move is toward the Registrar's Office,
where he transfers out of Principles of Risk and Insurance and into
Principles of Management. Good luck Joe!
The word "risk" may originate from the Arabic word "risq" or the Latin
word "risicum". The Greek word "rhiza· is refering to the hazards of sailing
around a cliff.
The french word "risque" has a speculative connotation in "qui risque rien n'a
rien" (nothing ventured, nothing gained). In English, it is used in many nuances
in different contexts, often leading to confusion and misunderstanding. In 1966,
the Commission on Insurance Terminology of the American Risk and Insurance
Association approved the following definition of risk: "Uncertainty as to the
outcome of an event when two or more possibilities exists. "9 The disagreement
or confusion still persist today. The need for agreement on a common risk
vocabulary was recognized by the Society for Risk Analysis when it established
its Committee for Definitions. Thirteen definitions were considered by the
Committee, none even close to the one adopted by the American Risk and
Insurance Association. 

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