Types of Risk

POBF 5.02


The possibility of incurring a loss

Ex: failure to have experience

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Economic risk

The chance that conditions will affect an investment, usually one in a foreign country.

Ex: exchange rates, government regulation, or political stability

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Non-economic risk

A type of risk that may result in the embarrassment or inconvenience without financial impact

Ex: a traffic accident

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Pure risk

A type of risk that is a threat of a loss without an opportunity for gain.

Ex: severe weather

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Speculative risk

A type of risk that offers the chance to experience gain or loss.

Ex: investing your money in a new business

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Controllable risk

A type of risk that occurs when conditions can be controlled to lessen the chance of harm.

Ex: Train employees to be alert

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Uncontrollable risk

A type of risk that cannot be controlled or reduced by actions.

Ex: a sudden hailstorm affecting a farmer's crops

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Insurable risk

A type of risk that meets the criteria of an insurance company for coverage.

Ex: Storm, damage and theft

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Uninsurable risk

A type of risk that the possible amount of loss is simply upredictable.

Ex: Setting us

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Ways that businesses manage risk

  1. Avoid
  2. Transfer
  3. Insure
  4. Assume