Types of Risk

POBF 5.02

Risk

The possibility of incurring a loss


Ex: failure to have experience

Big image

Economic risk

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


Ex: exchange rates, government regulation, or political stability

Big image

Non-economic risk

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


Ex: a traffic accident

Big image

Pure risk

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


Ex: severe weather

Big image

Speculative risk

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


Ex: investing your money in a new business

Big image

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

Big image

Uncontrollable risk

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


Ex: a sudden hailstorm affecting a farmer's crops

Big image

Insurable risk

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


Ex: Storm, damage and theft

Big image

Uninsurable risk

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


Ex: Setting us

Big image

Ways that businesses manage risk

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