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risk

risk /rɪsk/

nounverbB1GRESATACTGMATTOEFLIELTSUPSC

generalformal

A situation involving exposure to danger, harm, or loss; in finance, the possibility that an investment's actual return will differ from its expected return, often implying a potential for loss.

In finance, 'risk' is not just about the potential for loss, but also the uncertainty of returns. Higher potential returns often come with higher risk.

The story behind the word. The word 'risk' comes from the Italian 'risco' or 'rischio,' which originally referred to the danger encountered by ships sailing near rocks. It entered English in the 17th century, initially in maritime contexts, and then broadened to mean any exposure to danger or loss. Its financial application became prominent as complex financial instruments developed.

Word relationships

hazard: Often implies a more immediate or physical danger.
peril: Suggests grave and imminent danger.
uncertainty: Broader term for lack of certainty; 'risk' specifically implies potential negative outcomes.

safety: The condition of being protected from danger, risk, or injury.
security: The state of being free from danger or threat.

Commonly confused with

volatility: 'Risk' is the overall potential for loss or deviation from expected returns; 'volatility' is a measure of how much an asset's price fluctuates, which is one component of risk.

Word family

risky (adjective): Full of the possibility of danger, failure, or loss.
risk-averse (adjective): Reluctant to take risks.
risk-taker (noun): A person who likes to take risks.

Collocations

high risk
low risk
manage risk
take a risk
risk assessment
risk management
risk tolerance

Idioms & expressions

at risk
run the risk
risk one's neck

Example sentences

"Before making any financial decision, it's crucial to assess the associated risk." Every investment carries some degree of risk.
"Investors often weigh the potential return against the inherent risk of an investment." The company decided to risk a large sum on a new, unproven technology.

Memory hook

Don't 'RISK' losing your money; always do your research. RISK: danger of loss.

When not to use

Avoid using 'risk' when referring to a guaranteed outcome or a certainty.

Fun facts

In finance, there are different types of risk, such as market risk, credit risk, interest rate risk, and liquidity risk.
The concept of 'risk management' is a critical discipline in finance, aiming to identify, assess, and mitigate risks.