Risk is one of the most important factors that affect a person?s welfare and it is commonly
associated with the probability of unexpected loss or injury (Dallas, 2006; Harwood, Heifner,
Coble, Perry, & Somwaru, 1999). Conversely, risk is widely viewed as a complicated factor
that influences decision making under uncertain conditions that may affect outcomes in the
future (Hardaker, Huirne, Anderson, & Lien, 2004; McCarl & Spreen, 1996).
There are different definitions of risk and how it is determined. Levy (2006, p. 1) stated that
“people may have a feel as to what risk means, but if asked how to measure it, there would be
a little consensus”. Knight (1921) cited by Rose (2001) emphasized the sharp distinction
between risk and uncertainty. Risk can be defined as the possible outcomes and the
probability distribution of each outcome are known and measurable. In contrast, uncertainty
exists when the probability of future outcomes is unknown. However, some economists have
argued that the terms risk or uncertainty can be used interchangeably (Dillon & Anderson,
1990; Roumasset, 1976). Risk occurs when the outcome of an operation cannot be forecast
with certainty but each outcome can be explained by the subjective probabilities. The authors
also argued that risk can be defined as variability of outcomes.