Question

Risk is a situation:

(A)That has severe consequences.

(B)That has variability in the outcomes

(C)That has more than one decision.

(D)That has factors that cannot be measured.

Answer 1

Risk refers to the variability in outcomes and the presence of severe consequences, involving imperfect information and managing uncertainty in contexts such as insurance and investments.

Step-by-step explanation:

Risk can be understood as the presence of variability in outcomes, where different scenarios might unfold, some of which may have severe consequences. In the context of insurance and investment, risk involves managing the uncertainty of events and estimating the probabilities and impacts of potential adverse outcomes. For instance, in insurance, risk estimation is complicated due to imperfect information regarding future events and individual behaviour. Expected rate of return on an investment is a measure of average projected profitability, while the actual rate of return is what is actually achieved, and risk represents the uncertainty or variability between these two figures.

In the broader sense, risk does not only concern financial matters but can also involve environmental damage, social and economic impacts, and public health issues, along with considerations about the feasibility of control or eradication in scenarios such as plant invasions or natural disasters.