ABSTRACT
Etymologically, risk is the chance of injury, damage, or loss, i.e., a hazard. In banking and in insurance, risk is expressed quantitatively as the degree or probability of loss. The doors of risk and of return are adjacent and identical. The concept underpinning risk management is based on controlling assumed exposure: identifying risks, updating them steadily, and evaluating financial staying power to confront and take charge of them. The nature of risk, its extent, and, aftermath change over time. It may even reverse some of its characteristics. This makes the management of exposure much more difficult. Down to basics, risk is a cost, but the criteria we use to judge it are not statistics. Thinking by analogy, an excellent paradigm of risk being assumed is people’s weight. As stated in The Economist, “When the world was a simpler place, the rich were fat, the poor were thin, and right-thinking people worried about how to feed the hungry. Now, in much of the world, the rich are thin, the poor are fat, and right-thinking people are worrying about obesity.”1
