[FOUNTAIN]Risky business and RohIn economics, the word “risk” is used to describe the possibility of loss in a certain situation.
The reason banks have different interest rates for people who borrow money according to their credit rating is because the banks know by experience how much risk they have to allow to get their money back. Banks control their risk level on borrowed money through different interest rates.
Ronald A. Howard, a professor of Stanford University, defined risk as a possibility that could bring bad results.
The reason people call the chance to lose their borrowed money risk and not just chance is because they hope to avoid a bad result.
Risk in investment includes the chance of losing the money; risk in a love relationship includes the chance of being dumped. For things that may bring desirable results, the word risk is not used.
Whether people realize it or not, they control the risks they face ― how much money to invest and where, how much humiliation they should endure to keep their job, who they should vote for as the next president. They all do calculations in their minds. They all worry about how much chance the bad result has and how much risk they can handle.
In a loss of ten million won, there is a world of difference between someone who owns 10 billion won and someone who has one hundred million won.
In that situation, risk tolerance is the range of risk one can endure. Risk tolerance is influenced by one’s financial status.
Rich people are willing to risk some financial loss; people who are strong and outgoing will not be totally devastated by a breakup, though they may be heartbroken.
About half of the Korean nation chose President Roh Moo-hyun, despite great risk, in last term’s presidential election. Back then, people saw the risk of selecting the wrong president as a small thing, or they had great risk tolerance and were willing to suffer some kind of failure.
Four years later, a bad result has occurred, with the president remarking that he might step out of office.
Even if we made the wrong calculation in the first place, there is no way to take back the results now.
The problem is whether the current bad situation is within the range of risk tolerance or not. It is not clear what the risk tolerance was in the first place, but the fact is that the approval rating for the president has dropped to 10 percent. Can we tolerate that?
The writer is an editorial writer
of the JoongAng Ilbo.
by Kim Jong-soo