**3. Theory of probabilities in risk review**

Can it be estimated and avoided the risk only by using the manager's intuition? The answer is clear, demonstrated by daily realities. An inherent aspect of any activity is the possibility of existence of a not desired event, for which it would be ideal at least determining the probability of manifestation. To the possibility of manifestation of a situation, process, phenomenon, etc. it can be associated an interval or one or more concrete answers. In the probabilities theory, these elements are defined as discrete random variables (the ones for which there can be enumerated the results) and continuous ones (those for which there can be placed the results in certain intervals).In practice, there can be also used mixed variables, which report to the possibility of using a combination of the two types mentioned previously for reflecting the possible results (these are specific to the insurance sector).

These probabilities can be identified, but, the recorded results do not appear at the same time also at the level of all variants. For instance, at a bowling competition, you can strike down between 0 and 6 skittles (there are 7 possible results), but only after the throw you will clearly know their number, without being possible recording in the same time two variants. The question is however to assess the probability of the results to action. In the case of discrete variables, things seem simple; the evaluation is possible by reporting favorable variations at the number of possible cases. For example, consider an economic agent who has an order for making furniture for at least one piece of each, but with a higher production capacity. In this context, he would like to know what is the probability to charge a minimum amount of 3000 euro from the sale of the goods mentioned, knowing that the unit price of sale is 500 euro for product X and 300 euro for product Y, and the quantity that can be offered for sale is of 5 pieces of each product. To identify favorable situations, are followed the dates from table 2.

Risk Management in Business – The Foundation of Performance in Economic Organizations 235

In this context, our approach supports the need for linking conceptual issues from the economic theory with the creation of a information database as complete as possible (reported not only to statistical data but also to forecasted information), so that economic entities to identify the trend of the evolution of phenomena and processes that influence the market and over the economic – financial situation. Such behavior would allow them to achieve the obtained objectives established with the available resources and opportunities for action. Obviously, the process of obtaining information is costly. But, what is more important - recording some additional costs generated by obtaining essential information and avoiding unintended consequences through the manifestation of some risks that have not been identified and evaluated? The answer can be supported by arguing that the firm size is conditioned by the need and the information possibilities, also by the information costs [7]. We must not believe that the fact of having a large volume of information on possible alternatives, allows adopting decisions in the absence of risk conditions and uncertainty. But, ignoring the information pushed to the extreme by the rationing "anyway it will happen, with or without strategy "can only be counterproductive attitude, with negative repercussions that can result even in

Is risk identification sufficient to determine a course of action so as to avoid or minimize losses? Obviously, the answer is no. An important aspect of risk management is represented by dimensioning its size so that there can be evaluated the effects generated by its

 The existence of multiple risks does not determine the reduction or increase of losses specific to a certain category (e.g., the loss caused by the manifestation of interest rate

 The manifestation of a risk does not automatically act on the probability of the appearance of another risk (the increase of price of used raw materials does not directly

The losses caused by the manifestation of a risk must be under the level of available

On any business, the activity is reported on the components, differentiated in relation to the business established at its set up. Considering an economic agent engaged in the activities of production and marketing, we can identify and assess major risks that may occur in the economic, financial, investment and trade area. For this, it is imposed stating the

This structure allows capital allocation process targeting specific risk assessment activities of the two components. As a consequence, we shall report to the main risk categories that

manifestation. In general, risk quantification starts from certain assumptions:

risk does not action over the one arising from environmental risk);

or indirectly influence the risk of the firm's reputation);

bankruptcy.

**4. Possibilities for risk assessment** 

assets owned by the company.

possibilities of capital (Figure 2).

action at the level of each component.


**Table 2.** The Matrix of possible situations

Given the minimum amount targeted and unit sales prices, the favorable situations are represented by the following cases: (3X, 5Y) (4x, 4y) (4X, 5Y), (5X, 2Y) (5X, 3Y); (5X, 4y), (5X, 5Y). As a result, there are 7 favorable cases from 25 possible. The probability of obtaining the amount targeted is 7/25 = 0.28. Certainly, the example considered is simple, but we took into consideration highlighting a case that allows a quick estimate of the probability of recording a desired situation. And in the case of continuous random variables, the probability theory gives the theoretical foundation for identifying the possibility of manifestation of a situation.

It cannot be questioned the result of applying these mathematical methods for assessing the probability of outcomes to appear. And still, we must consider the following aspect: how many managers know the probability theory, are willing to apply it and are convinced that they can use it in any case, according to the level of complexity of the factors that can influence the work done? If it would be made a survey in Romania, especially at the level of small and medium organizations, the percentage would be extremely low.

Moreover, the risk management issue in our country has acquired a well-defined contour in a recent period, the researches performed being divided and the simple and the legislation is insufficient and permissive. In addition, although the manifestation of a result can be anticipated through these rational methods, even the term used, "probability" "shows that the activity of the economic agents cannot be translated into logical terms to quantify some uncertain aspects. Also, the use of some statistical data for sizing the probability of the appearance of a phenomenon allows obtaining relevant results when reporting to a large number of different cases that are not interrelated.

In this context, our approach supports the need for linking conceptual issues from the economic theory with the creation of a information database as complete as possible (reported not only to statistical data but also to forecasted information), so that economic entities to identify the trend of the evolution of phenomena and processes that influence the market and over the economic – financial situation. Such behavior would allow them to achieve the obtained objectives established with the available resources and opportunities for action. Obviously, the process of obtaining information is costly. But, what is more important - recording some additional costs generated by obtaining essential information and avoiding unintended consequences through the manifestation of some risks that have not been identified and evaluated? The answer can be supported by arguing that the firm size is conditioned by the need and the information possibilities, also by the information costs [7]. We must not believe that the fact of having a large volume of information on possible alternatives, allows adopting decisions in the absence of risk conditions and uncertainty. But, ignoring the information pushed to the extreme by the rationing "anyway it will happen, with or without strategy "can only be counterproductive attitude, with negative repercussions that can result even in bankruptcy.
