Risk is the uncertainty (today) surrounding the eventual outcome of an event which will occur in the future.

Example: when tossing a coin, some one is not sure exactly what the outcome will be. The outcome may be Tail or Head, so there is a concept of risk. In a football match, three outcomes can be experienced: win, loss or draw. In business, the same can happen regarding the expected return on the investments in various sectors.

In Financial Analysis, the risk/return trade-off states that financial decisions that subject stockholders to more risk must offer a higher expected return.

Risk aversion is the tendency to try to avoid risky situations unless adequate compensation is offered.

The risk averse individual faced with two events each having the same expected outcome will choose the outcome with the lower level of risk.

Example:

A person is given the choice between two scenarios, one certain and one not. In the certain scenario, the person receives $50. In the uncertain scenario, a coin is flipped to decide whether the person receives $100 or nothing. The expected payoff for both scenarios is $50, meaning that an individual who was insensitive to risk would not care whether they took the certain payment or the gamble. However, individuals may have different risk attitudes.

A person is Risk-averse if he or she would accept a payoff of less than $50 (for example, $40), with no uncertainty, rather than taking the gamble and possibly receiving nothing.

The defensive teams are risk-averse.