Theories of Risk

Theories of risk explore how individuals and organizations perceive, evaluate, and respond to uncertain situations. Key concepts include the likelihood of an event occurring and its potential impact. Psychometric theory suggests that people's emotional responses shape their risk perception, while the cultural theory posits that societal values influence how risks are viewed. Decision theory focuses on rational choices under uncertainty, weighing potential gains against losses. Understanding these theories helps us make informed decisions in various contexts, from financial investments to health choices, by recognizing how we assess and react to risk in everyday life.