On how to define, understand and describe risk

The prevailing perspectives and definitions of risk, at least in the engineering community, are based on probabilities. In this paper we argue that such perspectives and definitions are too narrow. The probability component of the risk concept should be replaced by uncertainty. By jumping directly into probabilities, important uncertainty aspects could easily be overlooked or truncated. In the paper we point at several extended risk definitions, and a formal structure for the various perspectives and definitions is developed. Fundamental concepts such as second-order probabilities and uncertainties are discussed. Examples are provided showing the importance of the choice of risk perspective in a risk assessment and decision-making context. The examples cover offshore operations, security and market price risks. (C) 2010 Elsevier Ltd. All rights reserved.