Types of Risk

by Anthony Davis

Risk and Risk Management

The possibility of incurring loss; therefore risk management is the process of managing risk to achieve set objectives.


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Economic Risk

Results in financial loss.

Ex. Economic risk is the chance that macroeconomic conditions like exchange rates, government regulation, or political stability will affect an investment, usually one in a foreign country.



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May result in in embarrassment or inconvenience without a financial impact.

Ex. Non-economic loss refers to the loss and damage which is not accounted for in the formal accounting procedures which measure loss and damage.



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Pure Risk

The threat of a loss without an opportunity for gain.

Ex. The possibility that a person's house will be destroyed due to natural disaster is pure risk.


Speculative Risk

Offers the chance of gain or loss.

Ex. There are 3 possible outcomes of speculative risk, something good (gain), a loss, or staying even. Gambling and investing in stock is speculative risk.


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Controllable Risk

Occurs when conditions can be controlled to lessen the chance of harm.


Uncontrollable Risk

Cannot be controlled or reduced by your actions.

Insurable Risk

Meets the criteria of an insurance company for coverage.

Uninsurable Risk

A hazard or condition that has either a high likelihood of loss, or in which the insurance would be considered against the law.



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