Risk–benefit ratio

Risk–benefit ratio - brief summary

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A risk–benefit ratio is the ratio of the risk of an action to its potential benefits. Risk–benefit analysis is analysis that seeks to quantify the risk and benefits and hence their ratio. Analyzing a risk can be heavily dependent on the human factor. A certain level of risk in our lives is accepted as necessary to achieve certain benefits. For example, driving an automobile is a risk most people take daily, also since it is mitigated by the controlling factor of their perception of their individual ability to manage the risk-creating situation. When individuals are exposed to involuntary risk (a risk over which they have no control), they make risk aversion their primary goal. Under these circumstances individuals require the probability of risk to be as much as one thousand times smaller.

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