Risk–Benefit Analysis

Risk–benefit analysis is the comparison of the risk of a situation to its related benefits. Exposure to personal risk is recognized as a normal aspect of everyday life. We accept a certain level of risk in our lives as necessary to achieve certain benefits. In most of these risks we feel as though we have some sort of control over the situation. For example, driving an automobile is a risk most people take daily. “The controlling factor appears to be their perception of their individual ability to manage the risk-creating situation.” Analyzing the risk of a situation is, however, very dependent on the individual doing the analysis. When individuals are exposed to involuntary risk (a risk in which they have no control over), 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 than for the same situation under their perceived control.