In my experience, most investors’ risk hierarchy looks something like the following.
In a less highly imperfect world, I would prefer to see #2 rank above #1, but our risk aversions are just too high for that to happen very often. Most often, #3 comes into play in very good times — when fear has disappeared and when greed and ego are in charge. Finally, #4 typically only matters to the professionals and, even then, largely because it’s elegant and makes the math work out better.
It is fascinating, therefore, that for many in this business risk is actually presumed to be volatility. Of course, even then, it only tends to apply when issues are being dealt with conceptually or when it’s self-serving to do so. When a portfolio is tanking, even the most rational of traders is very concerned with #1 and #2.