Oral Bac 2012 G1-G2
Risk is born of uncertainty and is inseparable from business as it is from any aspect of human life. If all uncertainty as to the course of future events could be eliminated, risk would be eliminated, risk would cease to exist. As it is, risk cannot be eliminated, though to some extent, it can be brought under control and reduced, as by adopting precautionary measures or by increasing the power of prediction. Thus, the installation of fire extinguishing appliances can modify the fire hazard.
The techniques of market research, by substituting precise information for mere supposition and guesswork, can also do much to reduce the uncertainties and therefore the risks of the market.
Insurance is the conversion of indeterminate risks to business concerns and individuals are exposed into a fixed cost calculated on the total of the risks involved.
It converts the possibility of disastrous loss into a fixed annual payment and is sometimes described quite simply as putting together or spreading risks. It enables a
shopkeeper to translate the uncertainty of a broken glass window into a fixed annual cost that can be entered into his calculations in the same way as other costs like rent
and wages. The amount of the fixed cost is calculated on the predicted number of damages experienced by shopkeepers taking part in the programme.
A Guide to the Business World, p 420