ABSTRACT
Controlling risks effectively requires the use of decision analysis in an economic framework within political and regulatory constraints. Risk treatments needed for risk control should be based on an underlying philosophy for risk management. This chapter introduces fundamental concepts for risk treatment and control within an economic framework, including risk aversion, risk homeostasis, discounting procedures, decision analysis, trade-off analysis, insurance models, and risk financing. The chapter also briefly covers the concept of exposure and residual risk.
