Risk aversion

Risk aversion is the tendency to prefer certainty over uncertainty, even if the uncertain option might have a higher potential reward. In practical terms, risk-averse individuals or organizations prioritize protecting their existing resources and are cautious about taking actions that could lead to losses. They tend to choose safer options with less variability in outcomes, valuing stability and peace of mind over potentially larger, but less certain, gains. This behavior is common in financial decisions, investments, and business strategies, reflecting a preference for minimized risk to avoid negative outcomes.