Which statement describes risk?

• A. A situation where a decision maker knows several possible future outcomes are possible
• B. A situation with no information about possible outcomes
• C. A guaranteed outcome with known probability
• D. An outcome that cannot be predicted with any probability

Answer: (A)

Risk is about uncertainty with multiple possible results. When you know there are several possible futures that could occur, you’re facing risk because the outcome isn’t certain and each possibility could be assigned some likelihood. This lets you evaluate potential impacts and, if you can estimate probabilities, compare expected outcomes and manage the exposure.

The other descriptions describe situations lacking that sense of multiple plausible results with usable likelihoods: having no information about outcomes means you can’t form any probability estimates; a guaranteed outcome with known probability is a certainty, not risk; and an outcome that cannot be predicted with any probability represents total uncertainty without any basis for estimating chances.