Professor Forman

Facing Risks vs. Taking Risks

There are two faces to risk — each important, but fundamentally different.

When facing risks, we are concerned about uncertain events that, if they happen, will result in a loss or losses. The loss can be financial, or damage to reputation, or a combination of myriad of losses — perhaps arranged in a hierarchy.

When taking risks, we are concerned about selecting an alternative that provides the best trade-off between risks and benefits.

It is important to recognize the different focus of risk facing and risk taking. Events are the focus of facing risks while alternatives are the focus of taking risks.

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