What’s Risk?

We often use the word ”risk” without profound consideration in our daily conversations as something affecting us badly or we don’t know. Even in Japan, the word has nowadays started to be heard in talks and seen in Katakana character (a form expressed usually for foreign languages) on newspapers almost every day. Since there is no deep consideration in the definition of the word, some people misunderstand the meaning. Some are confused by the usage between risk and danger. Some turn their eyes to only the negative side of risk. This kind of misunderstanding is inevitable simply because of individual conversational usage, not professional one. To deal with risks in our life, however, it’s significant to understand the meaning of the word

In one dictionary, “risk” means the chance of injuries, damages and loss. In another, it means the possibility that something bad may happen. Although risk has a variety of meanings depending on dictionaries and the people using it, I want to deal with a broad range of risks, which mean the chance or possibility of loss arising out of uncertainty. Contrarily, the word, “danger” often regarded as almost same meaning of risk should be discerned form the meaning of risk.

Danger is a thing that causes injury or loss. So it’s a rather visible and concrete factor that brings about loss. Sometimes it’s thought to be loss itself. For example, the country that always continue civil wars is definitely called a ”dangerous” country. This is because the factors of on-going domestic battles which obviously affect our life have already become visible. There may have been some victims in the civil war, where people recognize what’s going on. Turning back to “risk”, this is a element that is uncertain and latent. Unless people perceive the risk, we may be put into a situation where we confront some kind of potential loss. Destructive dangers are, of course, very fearful, but uncertain risks are also taken care of.

There are other some words related to risk such as peril (cause of loss), hazard(cause of peril). I explain the meanings of these words in the structure of risk in the next chapter. Since I want to deal with a broad range of risks, peril and hazard are included into risk. Therefore,.the meaning of risk in this book is something uncertain affecting your life.

The word “risk” is familiar in the financial field. When we invest money especially into stocks, we speculate which stock has the potential to increase the value. If you think that the price of a stock increases, you will buy it. There are occasions where you listen to the advice of analysts. Regardless of whether or not you completely believe the advice, you take responsibility for the investment results.

Everybody would be happy if all the stock he or she buys rose to the speculative level. Stock prices, however, often let you down. Stock prices reflect the future value of companies. Investors will buy stocks in anticipation of rising because the company is thought to be more lucrative in the future. Therefore investing stocks need detailed analyses of companies from different points of views. Otherwise, you will lose more possibly.

Even though minute analyses are done, stock prices are vulnerable. The prices fluctuate always. Ups and downs repeat incessantly. In the fluctuating states of stock prices, investment particularly into stocks involves those risks. You are sure to understand that investors will face the risk of loss in investing stocks. There are, however, not only downward risks but also upward risks. Upward risks! Investors would be happy when stocks they buy rose higher that they expect. Yes it’s true. Investment also involves upward risks. I mean that investors anticipate certain level of stock prices. Despite the stock price rises, there is a risk if the price doesn't approach to the satisfactory level as close as possible. If investors had injected much money into those hopeful stocks in the portfolio, they would have earned more profits. This is so-called chance loss. In the financial world, risk is the difference between the results and anticipation levels.

Particularly nowadays, the word ”risk” has been more familiar. This is attributable to the financial deregulation so called ”Big Bang”. In the middle eighties, the British government had made drastic reforms in the financial sector. The Japanese deregulation was named after the British version. In the series of financial deregulation, one of the biggest impact was the liberalization of the brokerage’s commission, which made it easier for investors to buy and sell stocks because of the lower mediatory commissions. To take advantage of the deregulation, some brokerage firms have been struggling to attract individual investors. Banks have also been rushing to individual financial assets that amount to almost 1300 trillion yen. When it comes to selling speculative financial products, it’s obligatory for financial institutions to explain to investors the “risks”. Not only semi-professional investors but also ordinary people who don’t invest are familiar with the phrase ”low risk,low return” or “high risk, high return”. Not when investing, the combinative usage about risk and return is at times used even in daily life.

There is a similar collocation related to the word ”risk”, which is also heard in usual conversations. It’s “ take a risk”. This collocation comes from financial investment as well. In anticipation of big returns, investors take the risks of losing even principals. If they don’t want to “take a risk”, the returns they can get will be small. Of course, wiser investors disperse their money into some different investments ranging from speculative stocks to sure national bonds while looking for the idealists portfolio to gain the maximum returns. Taking a risk really depends on how to think about returns.

Followed by the popular usage in the financial world, when we want to do something changeable in life, we are willing to say “ take a risk” We are faced with a lot of challenges such as changing jobs, trying something new. Buying houses is also a big challenge for most people. We confront the risks if a new house has an unretrievable defect, or is much less satisfactory that expected after actually living. Even in playing golf, golf players are occasionally at a loss if the ball strays into deep roughs or woods. They are swayed by whether they shot straight for the green or just get out the ball on the fairways. Considering the risk that the ball might be caught in trees, golfers sometimes take a risk.

The word “risk” seems to be negative because of the nature of uncertainty. People tend to regard something uncertain as negative. But the original meaning of the word is a little different. “Risk” means to dare to try bravely. It stems from the Italian language,"risicare". Uncertainty has, in another way, the potential for success, not only for the dark sides of failures. Now, we have to spotlight the positive sides of risks. It’s absolutely necessary to take the possibility of loss or failure into account. However, living with risks wisely will help your better life. therefore,personal risk management (PRM) is a tool for positive ways of life.

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