What is Risk?

The Oxford Dictionary defines risk as, “A situation involving exposure to danger, or to expose someone or something valued to danger, harm or loss.”

 I think this definition summarizes how we tend to think about risk in our daily lives. But how do we define risk from a financial perspective? Textbooks touch on financial risk in discussions of something called standard deviation, which is a measure of the variation around the mean (average). In the financial realm, standard deviation revolves around volatility. Risk always involves uncertainty, and in finance, it often deals with market forecasts. As I read, study and talk with clients, I’m always thinking about risk. When I was a professional golfer, I constantly thought about risk. I think that my personal perspective on risk is slightly different from the textbook version.