risk aversion: meaning, definition, pronunciation and examples
C1Formal; common in technical, academic, business, and financial contexts.
Quick answer
What does “risk aversion” mean?
A tendency to prefer certainty and avoid risk, especially in decision-making. The preference for a certain, possibly lower, outcome over a gamble with a potentially higher, but uncertain, outcome.
Audio
Pronunciation
Definition
Meaning and Definition
A tendency to prefer certainty and avoid risk, especially in decision-making. The preference for a certain, possibly lower, outcome over a gamble with a potentially higher, but uncertain, outcome.
A psychological trait or economic principle where an individual or institution exhibits a dislike for uncertainty and potential loss, often leading to conservative choices, insurance purchasing, or lower-return investments. In broader contexts, it can describe a cultural or organizational reluctance to innovate or change.
Dialectal Variation
British vs American Usage
Differences
No significant spelling or usage differences. The concept is identical in both varieties.
Connotations
Slightly more common in American financial journalism. In British contexts, it might appear more frequently in academic economics.
Frequency
Comparatively high and similar frequency in both varieties within specialist fields; lower in general everyday speech.
Grammar
How to Use “risk aversion” in a Sentence
The [investor]'s risk aversion led to...Risk aversion among [pensioners] is high.A policy driven by risk aversion.To act out of risk aversion.Vocabulary
Collocations
Examples
Examples of “risk aversion” in a Sentence
verb
British English
- The regulator's actions are risk-averse.
- They risk-aversely chose the government bonds.
American English
- The management team is very risk-averse.
- They acted risk-aversely, rejecting the merger.
adverb
British English
- The fund is managed risk-aversely.
- They invested risk-aversely after the crash.
American English
- The committee decided risk-aversely.
- He tends to act risk-aversely in negotiations.
adjective
British English
- He has a risk-averse investment strategy.
- A risk-averse culture prevails in the organisation.
American English
- She is a risk-averse entrepreneur.
- The risk-averse policy stifled innovation.
Usage
Meaning in Context
Business
The board's risk aversion prevented them from entering the new market, despite its potential.
Academic
The study measured risk aversion using a series of incentivised lottery choices.
Everyday
My risk aversion means I always get travel insurance, even for short trips.
Technical
The utility function is concave, indicating risk aversion.
Vocabulary
Synonyms of “risk aversion”
Vocabulary
Antonyms of “risk aversion”
Watch out
Common Mistakes When Using “risk aversion”
- Using it as an adjective (e.g., 'He is very risk aversion') instead of 'risk-averse'.
- Confusing 'risk aversion' (the trait) with 'risk avoidance' (the act).
FAQ
Frequently Asked Questions
They are related but not identical. Caution is a general behaviour, while risk aversion is a specific, measurable preference in uncertain situations, often modelled in economics.
Yes, organisations can exhibit risk aversion collectively through their policies, investment strategies, and decision-making processes, often leading to missed opportunities but greater stability.
A risk-seeking or risk-loving person, who prefers uncertain prospects with potentially higher payoffs over certain outcomes with lower value.
Not necessarily. It is a rational trait that helps preserve capital and ensure survival. However, excessive risk aversion can lead to stagnation and missed growth opportunities.
A tendency to prefer certainty and avoid risk, especially in decision-making. The preference for a certain, possibly lower, outcome over a gamble with a potentially higher, but uncertain, outcome.
Risk aversion is usually formal; common in technical, academic, business, and financial contexts. in register.
Risk aversion: in British English it is pronounced /ˈrɪsk əˌvɜː.ʃən/, and in American English it is pronounced /ˈrɪsk əˌvɝː.ʒən/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “Better safe than sorry (conceptually related)”
- “A bird in the hand is worth two in the bush (conceptually related)”
Learning
Memory Aids
Mnemonic
Think of AVERsion as a strong feeling AGAINST something. Risk AVERsion is a strong feeling AGAINST taking risks.
Conceptual Metaphor
RISK IS A DANGEROUS OBJECT/SUBSTANCE TO BE AVOIDED.
Practice
Quiz
In behavioural economics, 'risk aversion' is most closely related to which of the following concepts?