There is no unambiguous definition of the concept of risk. It depends on what discipline we are working on. There are many approaches to its study, and often what we call risk in everyday life does not correspond to what is meant by it in scientific research. But it is possible to highlight the key characteristics of the risk.
First of all, in a risk situation, there is always some actor – not necessarily a person since there are financial risks in which corporate structures are involved. This entity makes decisions focused on the future situation, for example, on playing a $5 deposit casino NZ platform. This review will focus on why people take risks in order to succeed, and how justified it is.
Table of Contents
Why Do Entrepreneurs Take Risks?
There are at least three approaches to answering the question of why people take risks.
- The first is the simplest one: we have the opportunity to win. This defines our positive attitude to risk as we take risks to secure our future.
- The second approach views risk in the context of norms – generally accepted practices that we follow in different situations. As these risky practices are adopted by society, they become normal, so when we make these kinds of decisions, we don’t really think about the consequences. For example, in the question of whether or not to take a mortgage, we rely on the norms dictating acceptable behavior in this situation: “Many take a mortgage – why can’t I take one?” Or a person leaves the house in his car, which is also a risky decision. But this is part of our daily life. If we were to think every time about how to take risks, calculating this process, our actions would be paralyzed by fear. Perhaps we would prefer not to go outside at all.
- Risky practices are also mastered by institutions or institutional environments, within which risk is a part or basis of their functioning. For example, investing, buying, and selling stocks involves risk, but it is acceptable if you work on a financial exchange.
Life Experience
Decision-making also depends on life experience. People whose professional activities are systematically associated with situations of risk accumulate much more data than ordinary people. In each situation, the assessment of riskiness changes. The situation, which we see from the outside as risky, one may not consider as such: it is understandable and obvious.
But life experience can create an illusion in a person that one is in control, and this sometimes leads to frivolous behavior: if an experienced driver has often driven into the oncoming lane for many years, there is no guarantee that one will not get into an accident. Thanks to experience and skill, a person only reduces the likelihood of a bad outcome, for example, from 20 to 5%.
How Do We Assess Risk?
It is believed that there are two sides to risk assessment. The first is objective: we have scientific assessments of certain probabilities, as well as experience of what kind of consequences certain decisions may have. The second side is subjective: people themselves assess risks with a certain degree of reliability. There are factors that contribute to the overestimation and underestimation of risks. For example, in conditions when we take risks and prosper, we can talk either about underestimating unlikely risks or overestimating significant risks.
However, at least in sociology, there is a tendency to abandon the opposition of objective and subjective assessments. An objective assessment is based on calculated, measurable values, but this does not mean that the subjective assessment is a priori wrong. Ordinary people, non-specialists, look at risks more broadly, taking into account more factors, many of which cannot be quantified. Therefore, instead of a subjective risk assessment, it is more correct to talk about risk perception, which is multidimensional. Then it turns out that the magnitude of the consequences and the likelihood of risk occurrence are only a part of all the factors that determine the perception of risk by ordinary people and affect decision-making. And what is important, not all of these factors can be calculated.
Conclusion
By trying to avoid risk, you are missing out on opportunities that could change your life for the better. Moreover, this tendency is simply dangerous: it makes us vulnerable to “shocks” in the future. Plus, you never know exactly when a turning point will come, or when something else that threatens our careers will happen. If we are psychologically stable and resilient enough, we can more effectively seek out more promising opportunities and, at the same time, worry less about the consequences of unforeseen situations.
