| 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.
It is evident from the above definition of risk , that probability and loss are fundamental concepts in risk theory . 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 risk entails valuation . A loss is not always permanent. It can be temporary. For example, y can be returned in tact to X. The Lost And Found Units of businesses are established to foster temporary losses. Probability measures the likelihood of the occurrence of an event. This likelihood is mapped into a set of probabilities that has 0 as its minimum and 1 as its maximum. A probability of 0 implies certainty of non-occurrence. A probability of 1 implies certainty of occurrence. Inbetween these boundary probabilities are the other probabilities of the occurrence of the event. |
| The determination of Best Risk
for a specific risk scenario requires a comprehensive understanding of the characteristics of the space
containing the risk scenario. These characteristics are: . The containership property of the space . The identities of the entities in the space . The forces operating in the space . The motions in the space . The changes in the space . The interactions and groupings in the space . The equilibriums in the space The existential states of the entities in the space of interest change due to the forces , motions , interactions and disequilibriums in the space. These changes are caused by events with various probabilities of occurrence. A Loss occurs when an event , changes a valued existential state of an entity to a state of a lesser value. We can symbollically express this notion as follows: S1 ---------------------P(X)---------------------> S2 where, X is a random event that changes the valued state S1 to S2, a state of a lesser value. P(X) is the occurrence probability of X. So, value(S1) - value(S2) = L, the loss due to the change of S1 to S2 The occurrence probability P(X) and the loss L, form the basis for any risk analysis. Many events that impact existential states are not random events, that is, they are deterministic. |
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However, random events with associated occurrence probabilities are the events of primary interest in risk scenarios. Now consider the existential state S 1 of an entity y that has been impacted on by a random event X. Some probable direct consequences of the impact of X on S 1 are as follows: y 's existence could be terminated by the occurrence of the event X y 's health could be impaired y could loose his or her livelihood y 's property could be damaged or stolen The indirect consequences of the impact of X on S 1 are due to the impact of X on y 's relationships. Essentially, a risk scenario is an asset scenario . In other words, the primary objective of any risk analysis is to determine ways to prevent the events that cause the loss of our assets, or mitigate the consequences of the loss should the events occur. The assets are life, health, property and income. The frequency of the occurrence of the events and the severity of asset losses when the events occur, are the major areas of concern. All entities exist in risky spaces to the extent that life and health are existential assets and in so far as there are random events able to impact negatively on these assets. |
| To be continued. |
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| Let us use our environment respectfully so that future generations would not label us"prodigal ancestors" |
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