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Risk, Risk Perception, Risk Management – a Review of the Literature

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  • Vasvári, Tamás

Abstract

Risks have become an integral part of our society. In this context, the aim of this paper is to provide a summary of the findings of risk research conducted in different fields of study and to trace the effect of these findings on risk management practices. The basic approaches to risk presented in this paper show that the notions of probability employed in studying processes in any area of life belong in the province of epistemology rather than ontology. Therefore, subjectivity cannot be completely excluded from risk management. This inherent subjectivity influences willingness to take risks as well as decision-making and risk evaluation. If we conceive of risks as mass phenomena, we have a number of objective (quantitative) methods at our disposal to estimate their probability and effect. However, the significance of subjective (qualitative) professional judgment increases as the volume of available data decreases. Regardless of the risk analysis method used, it is a basic principle that the costs of risk management should not be higher than the risk itself which in turn determines also the scope of the risk analysis to be carried out.

Suggested Citation

  • Vasvári, Tamás, 2015. "Risk, Risk Perception, Risk Management – a Review of the Literature," Public Finance Quarterly, Corvinus University of Budapest, vol. 60(1), pages 29-48.
    • Handle: RePEc:pfq:journl:v:60:y:2015:i:1:p:29-48
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    File URL: https://unipub.lib.uni-corvinus.hu/8850/
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    1. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 69(1), pages 99-118.
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    Cited by:

    1. David Curto & Fernando Acebes & Jose M Gonzalez-Varona & David Poza, 2024. "Impact of aleatoric, stochastic and epistemic uncertainties on project cost contingency reserves," Papers 2406.03500, arXiv.org.
    2. Jedynak Piotr & Bąk Sylwia, 2020. "Understanding Uncertainty and Risk in Management," Journal of Intercultural Management, Sciendo, vol. 12(1), pages 12-35, March.

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    More about this item

    Keywords

    risk; uncertainty; decision-making;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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