The above historic attempts to define risk allow us to distinguish two basic concepts of risk that one would expect to encounter in economics:
- Negative concept of risk for instance in insurance, according to which risk occurs when there is a probability of incurring financial loss and/or physical damage when we do not reach a given goal of an activity.
- Neutral concept of risk, in which risk is treated as threat, and on the other hand, chance or odds. It means that the realized effect of a given activity may appear to be either better or worse than the expected one.
As stated above, risk is strictly connected with uncertainty with which we deal when we are not able, because we don’t have all the information, to say what will happen in the future. We do not know the proper cause-effect system that affects an event. Uncertainty is a state of mind experienced by the decision maker who faces two or more possibilities of choice.