Words-worth: Risk

'Risk' is a situation involving exposure to danger or, at least, the chance that something unpleasant will happen.

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Last Updated: 09 Oct 2013

The word in English dates back to the 17th century, when it was spelled 'risque', indicating its French origin. That seems to have come from the Italian risco, itself derived from a verb riscare, 'to run into danger'. Early uses referred to the real dangers of life (being hanged, for instance), but it took on a commercial meaning in the 18th century, when it described the chance of losses in insurance and then in business generally. Risk is not just chance but a measurable hazard that can be calculated by using probabilities and the value of any possible losses. In The Wealth of Nations (1776), Adam Smith made the classic statement of the meaning of risk in business: 'The ordinary rate of profit always rises more or less with the risk.' Entrepreneurs take risks and are rewarded for it. So do (and are) bankers, but they often employ an excellent method for dealing with risk: they use other people's money.

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