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The social dimensions of financial risk

Atul K. Shah (Department of Accounting and Finance, University of Essex, Wivenhoe Park, Colchester)

Journal of Financial Regulation and Compliance

ISSN: 1358-1988

Article publication date: 1 March 1997

673

Abstract

As money has come to play a central role in modern society the risk of losing money, financial risk, is a major concern for individuals and societies. Yet the understanding and analysis of financial risk in modern finance theory is very weak and incomplete. Its definitions are muddled with risk management issues, implying that only manageable risks are relevant for scientific analysis. There is also an explicit bias towards measurable risks, implying that unmeasurable risks are somehow irrelevant. Risk analysis in finance is devoid of an ethical stance, a prerequisite for any reasonable discussion of risk. Beck's ‘Risk Society’ is a powerful critique of modern science and its inability to deal with the significant increase in social and ecological risks created by modern industrial society. This paper uses concepts generated by Beck to unravel the various dimensions of financial risk, many of which have hitherto been ignored in the mainstream finance literature. It reveals the extent to which the analysis and understanding of risk in modern finance theory is partial and incomplete. Suggestions are then made for how the analysis of financial risk could be modified to include a wide range of individual, ethical and societal dimensions.

Citation

Shah, A.K. (1997), "The social dimensions of financial risk", Journal of Financial Regulation and Compliance, Vol. 5 No. 3, pp. 195-207. https://doi.org/10.1108/eb024927

Publisher

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MCB UP Ltd

Copyright © 1997, MCB UP Limited

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