On some foundational issues related to cost-benefit and risk

This paper provides some reflections on the use of cost-benefit type of analysis in a risk management context, with special focus on situations having a potential for extreme consequences. The paper summarises current ideas about risk and questions how these affect the understanding and use of cost-benefit analyses in such context. The need for seeing beyond the cost-benefit type of analysis based on expected values is broadly acknowledged in the literature, but the argumentation for this is not straightforward and can be further refined. The paper aims at contributing to this end by reviewing and discussing some recent work on these issues. Implications for risk management are also discussed. Copyright © 2017 Inderscience Enterprises Ltd.