00:00:03
It may seem like a daft question,
00:00:05
but as it turns out there's quite a bit of
confusion over what someone's thinking
00:00:09
when they use the word
00:00:13
are they thinking about the mere
possibility of something unpleasant
00:00:16
happening, or the actual likelihood of
something going horribly wrong?
00:00:21
it's an important distinction - especially
if you want to reduce or avoid risk
00:00:27
When everything else is stripped away,
00:00:29
what we're talking about here is worth -
00:00:32
what something is worth now,
00:00:34
and how it changes over time,
00:00:36
whether it's your savings, your
possessions, your livelihood, or your
00:00:43
it's a fact of life that bad
00:00:45
stuff happens - your car breaks down, you make a
bad investment, you're made redundant, you
00:00:52
And as a result, you lose something of
worth.
00:00:56
This is not good
00:00:58
But there are ways of reducing the pain:
00:01:01
you can take action - for instance - to
avoid bad things happening,
00:01:04
you can invest up fronts to cover
future losses,
00:01:07
or you can take a chance and simply
hope
00:01:12
But how do you know
00:01:13
which is the best option?
00:01:15
Guesswork probably isn't the greatest
idea as you have no idea whether the
00:01:20
investment you make to avoid a loss is...
00:01:25
What you really need
00:01:27
is some idea of how big a potential loss of
worth might be,
00:01:32
and how much of this loss can be reduced
if you take a certain course of action.
00:01:37
And this is where risk comes in.
00:01:40
Risk - and this is my definition - is the chance
of a specified loss of worth occurring.
00:01:47
It's a number - a probability - that is
linked to a particular reduction in worth.
00:01:53
Risk is not the possibility of something
going wrong -
00:01:56
instead, it's the probability of a
specific bad thing happening.
00:02:01
And because of this, it allows the pros and
cons of different risk avoidance,
00:02:05
management, and adaptation measures to be
weighed against each other.
00:02:10
So how does this apply to
00:02:12
Well, that's a topic for next week's
risk bites, so see you there!
русский▼
English
