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Managing Country Risk in an Age of Globalization pp 1–19Cite as

Palgrave Macmillan

Assessing Risk in a Global Economy

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Abstract

The word “risk” is often used interchangeably with the word “uncertainty.” For our purposes here, “uncertainty” is an overarching term that refers to any condition where the particular outcome is not known. “Risk” is a special case of uncertainty where we know both the set of potential outcomes and the probabilities of such outcomes. “Ambiguity” is another special case of uncertainty where we know the set of potential outcomes but not their probabilities. Uncertainty involves both the possibility of financial gain or loss. Risk management is ultimately the capability to anticipate significant themes and issues that can impact the well-being of an organization. It is an ongoing process that organizations use to identify, measure, monitor, and take actions relating to the wide range issues that they are exposed to in carrying out their mandates and missions.

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Notes

  1. 1.

    Thanks to Richard Peter of the Department of Finance at the University of Iowa for his guidance on these concepts and for helping us distill key themes from a large body of academic literature on these topics.

  2. 2.

    For one expression of Keynes’ thinking on this topic, see his famous essay of 1937 in which he refers to situations for which “there is no scientific basis on which to form any calculable probability whatever. We simply do not know” (Keynes 1937, 214). See also Dequech (2000).

  3. 3.

    For a thoughtful discussion of different conceptions of uncertainty , see Dequech (2011).

  4. 4.

    The term ambiguity in connection with uncertainty was first introduced by Daniel Ellsberg in his now famous paper (Ellsberg 1961).

  5. 5.

    Thanks to David Dequech for his correspondence on these themes.

  6. 6.

    For an example of a qualitative approach to risk appetite in the public sector, see Office of the Comptroller of the Currency (2016).

  7. 7.

    This was an expression used by William H. Donaldson when he served as chairman of the United States Securities and Exchange Commission from 2003 to 2005.

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Author information

Authors and Affiliations

  1. Skema Business School, Paris-Sophia Antipolis-Suzhou-Raleigh, France

    Michel Henry Bouchet

  2. Chappaqua, NY, USA

    Charles A. Fishkin

  3. Skema Business School, Paris-Sophia Antipolis-Suzhou-Raleigh, France

    Amaury Goguel

Authors
  1. Michel Henry Bouchet
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  2. Charles A. Fishkin
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  3. Amaury Goguel
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Correspondence to Michel Henry Bouchet .

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Bouchet, M.H., Fishkin, C.A., Goguel, A. (2018). Assessing Risk in a Global Economy. In: Managing Country Risk in an Age of Globalization. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-89752-3_1

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  • DOI: https://doi.org/10.1007/978-3-319-89752-3_1

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  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-319-89751-6

  • Online ISBN: 978-3-319-89752-3

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