The Risk View Of Loss

Peter Oye Sagay

Aug 19, 2018

Risk , the probability or chance of loss is an existential reality. Risk lurks in the existence of all entities. Consequently, its absolute elimination is always elusive. The elusiveness of Risk perpetuates Risk, thus leaving only the reduction of Risk as an existential possibility. Best Risk is realized when the gain in Risk reduction equals zero.

What is a loss? A loss is a change that impacts the existential state of an entity negatively . Consider an entity X who owns a property y. Suppose y is stolen, then there is a change in the existential state of X with respect to the ownership of y. If X values y, then a loss has occurred in the mathematical sense. If X does not value y, then a loss has occurred in the ordinary sense. In other words, the mathematics of loss entails valuation. This occurrence of loss in the mathematical sense is what is meant by the risk-view of loss. In the risk-view of loss, valuation is quantifiable and reduces after the occurrence of a loss-event.

A loss is not always permanent. It can be temporary. For example, y can be returned in tact to X (e.g. the Lost And Found Units of businesses are established to foster temporary losses). The flunctuations of the values of stock prices are examples of temporary losses.

The risk-view of loss entails probabilities of loss . Probability measures the likelihood of the occurrence of an event. This likelihood is mapped into a set of numbers that has 0 as its minimum and 1 as its maximum. A probability of 0 implies certainty of non-occurrence of the event. A probability of 1 implies certainty of occurrence of the event. In between these boundary probabilities are the other probabilities of the occurrence of the event. The need for probability is due to the probabilistic nature of many loss-events that are not describable by deterministic models.

Best Risk analysis for risk scenarios require comprehensive understanding of the occurrence of events within the framework of Pj Problems so that occurence probabilities of loss-events and the severity of losses can be optimally estimated.

All entities exist in risky spaces in so far as life , health and property are existential assets subject to loss. In the final analysis, the risk-view of loss seeks to mitigate the negative impact of existential loss when loss-events occur.

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