Risk Assessment: Tools, Techniques, and Their Applications

7.1 Introduction

Probability theory is thought to have evolved around 1654, with the French mathematicians Blaise Pascal and Pierre de Fermat. The theory was created in order to help gamblers in games of chance, such as “Roulette,” “Dice,” “Craps,” and “Cards” (1). This chapter provides only a brief overview of the concepts of probability. The readers are referred to a text on probability and statistics for an in-depth discussion.

Probability theory is an integral part of risk assessment. In fact, they go hand in hand. Whether it is gambling at a casino or the stock market or gambling with one's life on the freeway, actions are performed by people based on some knowledge or perception of the probability of a successful/unsuccessful outcome. Many times risks are taken and successful outcomes occur, and the common method of explaining this is that the person was lucky or conversely people will say they or someone else was unlucky if a negative outcome occurred. Luck, of course, is defined as a chance happening. Almost everyone and every culture have some feeling or perception of luck. Most people entering a casino hope they are lucky. They want a successful outcome. If they are successful then they were lucky, if not, well Karma or bad luck or some other supernatural force caused them to be unlucky. This superstitious view of luck or chance is different than viewing events based on the probability they will occur.

All games of chance (luck) are based on some predefined probability ...