Risk Management

AHMADU BELLO UNIVERSITY, ZARIA, NIGERIA.

FACULTY OF ADMINISTRATION

DEPARTMENT OF BUSINESS ADMINISTRATION

Msc BANKING AND FINANCE

EXAM NO: G14BAMBF8004

NAME: OYEDEKO YUSUF OLATUNJI

COURSE: RISK MANAGEMENT

ASSIGNMENT: DISCUSS THE IMPORTANCE OF RISK TO MANKIND

JUNE, 2015.

DISCUSS THE IMPORTANCE OF RISK TO MANKIND

1.0 Introduction

Risk is part of every human endeavor. From the moment we get up in the morning, drive or take public transportation to get to school or to work until we get back into our beds (and perhaps even afterwards), we are exposed to risks of different degrees. What makes the study of risk fascinating is that while some of this risk bearing may not be completely voluntary, we seek out some risks on our own (speeding on the highways or gambling, for instance) and enjoy them. While some of these risks may seem trivial, others make a significant difference in the way we live our lives. On a loftier note, it can be argued that every major advance in human civilization, from the caveman’s invention of tools to gene therapy, has been made possible because someone was willing to take a risk and challenge the status quo. In this assignment, I begin my exploration of risk by noting its definition and how best of importance is it to mankind.

2.1 Defining Risk

Given the ubiquity of risk in almost every human activity, it is surprising how little consensus there is about how to define risk. In 1921, Frank Knight summarized the difference between risk and uncertainty thus:

"… Uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has never been properly separated. … The essential fact is that "risk" means in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of this character; and there are far-reaching and crucial differences in the bearings of the phenomena depending on which of the two is really present and operating. … It will...