Risk:

1homas ! Adam sLaLs Lhe chance for loss due Lo some unforLunaLe occurrence ls called rlsk"
8lsk exposes Lo a chance of loss or damage as We rlsked loslng a loL of money ln Lhls venLure"
A venLure underLaken wlLhouL regard Lo posslble loss or ln[ury he saw Lhe rewards buL noL Lhe
rlsks of crlme 8lsk concerns Lhe devlaLlon of one or more resulLs of one or more fuLure evenLs
from Lhelr expecLed value 1echnlcally Lhe value of Lhose resulLs may be poslLlve or negaLlv
For example, a U.S. 1reasury bond ls consldered Lo be one of Lhe safesL (rlskfree) lnvesLmenLs
and when compared Lo a corporaLe bond provldes a lower raLe of reLurn 1he reason for Lhls ls
LhaL a corporaLlon ls much more llkely Lo go bankrupL Lhan Lhe uS governmenL 8ecause Lhe
rlsk of lnvesLlng ln a corporaLe bond ls hlgher lnvesLors are offered a hlgher raLe of reLurn
asiness Risk:
8uslness rlsks are rlsks LhaL could adversely affecL an enLlLys ablllLy Lo achleve lLs ob[ecLlves
and execuLe lLs sLraLegles or from Lhe seLLlng of lnapproprlaLe ob[ecLlves and sLraLegles 1he
chance LhaL an lnvesLmenLs acLual reLurn wlll be dlfferenL Lhan expecLed 8lsk lncludes Lhe
posslblllLy of loslng some or all of Lhe orlglnal lnvesLmenL
lor example Lhe rlsk LhaL Lhe cash flow of an lssuer wlll be lmpalred because of adverse
economlc condlLlons maklng lL dlfflculL for Lhe lssuer Lo meeL lLs operaLlng expenses Slmllarly
Lhe rlsk lnherenL ln a companys operaLlons reflecLed ln Lhe varlablllLy ln earnlngs A weakenlng
ln consumer lnLeresL or Lechnologlcal obsolescence usually causes Lhe decllne Lxamples
lnclude manufacLurers of vlnyl records elghL Lrack recordlng Lapes and beLa vldeo machlnes
SssificS`ion of Risk:
SssificS`ion by nS`a^e
SpecaS`ive ^isk
A caLegory of rlsk LhaL when underLaken resulLs ln an uncerLaln degree of galn or loss All
speculaLlve rlsks are made as consclous cholces and are noL [usL a resulL of unconLrollable
clrcumsLances
deIinition, almost all investment activities involve speculative risks, as an investor has no
idea whether an investment will be a blazing success or an utter Iailure. However, some
investments are more speculative than others. For example, investing in government bonds has
much less speculative risk than investing in junk bonds, because government bonds have a much
lower risk oI deIault.
a^e ^isk
categor oI risk in which loss is the onl possible outcome; there is no beneIicial result. Pure
risk is related to events that are beond the risk-taker's control and, thereIore, a person cannot
consciousl take on pure risk. This is the opposite oI speculative risk.

For example, the possibilit that a person's house will be destroed due to a natural disaster is
pure risk. In this example, it is unlikel that there would be an potential beneIit to this risk.

There are products that can be purchased to mitigate pure risk. For example, home insurance can
be used to protect homeowners Irom the risk that their homes will be destroed.

Other examples oI pure risk events include premature death, identit theIt and career-ending
disabilities.
Risk by bSppening of even`s:
^ope^`y Risk
Propert risks the include: Iire, technological risks, theIt, misconduct, suspension oI business,
hail, etc.
There are a number oI things ou can do to limit our risk when purchasing a propert. To begin
with ou should alwas obtain legal advice on our purchase. This will ensure ou are Iull
aware oI all our legal obligations and nothing is leIt to chance. You should also seek advice in
respect to ownership. You can also reduce the risk b ensuring ou have a licensed propert
manager managing the rental oI our propert.
iSbii`y Risk
1he rlsk LhaL Lhe legal sysLem may assess punlLlve damages agalnsL you lf properLy damage or
personal ln[urles can be aLLrlbuLed Lo your carelessness or negllgence
Lxamples
A) 6enero/ Liobi/ity risk Ceneral LlablllLy rlsk refers Lo Lhe rlsk of Lhe companys operaLlons
causlng damage Lo Lhe companys employees conLracLual parLles or Lhlrd parLles
8) 9roduct Liobi/ity risk roducL LlablllLy rlsk refers Lo Lhe rlsk of a producL launched by Lhe
company causlng damage Lo a person or Lo oLher properLy
C) ontroctuo/ risk ConLracLual rlsk refers Lo Lhe rlsk of conLracLs noL belng fulfllled properly
or wlLhln Lhe agreed Llme llmlL whlch can resulL ln losses and oLher consequences for Lhe
company
Risk by on`^oSbii`y:
on`^oSbe
robablllLy of loss arlslng from Lhe Lendency of lnLernal conLrol sysLems Lo lose Lhelr
effecLlveness over Llme and Lhus expose (or fall Lo prevenL exposure of) Lhe asseLs Lhey were
lnsLlLuLed Lo proLecL lor example #isk related to the eIIectiveness oI a client's internal control
structure policies and procedures. n ineIIective internal control increases control risk.
ncon`^oSbe
unconLrollable 8lsks are Lhose rlsks Lo Lhe pro[ecL whlch lf occurrlng cannoL be mlLlgaLed ln
any way by Lhe pro[ecL manager or Lhe Leam are llsLed ln Lhe pro[ecL plan and requlre Lhe prlor
dlrecLlon of Lhe pro[ecLs sponsor before any furLher acLlon can be Laken lor example buslness
cycle economlc or pollLlcal lnsLablllLy lnflaLlon or deflaLlon and naLural facLors llke flood
earLhquack are unconLrollable rlsks
Risk by p^o`ec`ion:
Insa^Sbe ^isk
An lnsurable rlsk ls a rlsk LhaL meeLs Lhe ldeal crlLerla for efflclenL lnsurance 1he concepL of
lnsurable rlsk underlles nearly all lnsurance declslons #isks Ior which it is relativel eas to get
insurance and that meet certain criteria. These include being deIinable, accidental in nature, and
part oI a group oI similar risks large enough to make losses predictable. The conditions that
make a risk insurable are (a) the peril insured against must produce a deIinite loss not under the
control oI the insured, (b) there must be a large number oI homogeneous exposures subject to the
same perils, (c) the loss must be calculable and the cost oI insuring it must be
ninsa^Sbe ^isk
An unlnsurable rlsk ls one whlch ls llLerally unlnsurable because loss ls cerLaln raLher Lhan
posslble lor example a person whose medlcal condlLlon and hlsLory or avocaLlon or llfesLyle ls
deLermlned Lo represenL such a hlgh rlsk of loss of llfe LhaL an lnsurance company wlll noL offer
coverage
Risk on `be bSses of U^gSnizS`ion:
In`e^nS ^isk
nLernal rlsks are essenLlally wlLhln your conLrol provlded you have Lhe apLlLude and aLLenLlon
Lo deLall Lo exerclse lL Such rlsks could lnclude
n
uo you have Lhe lnLulLlon Lo sLock Lhe rlghL lLems Lhe hoL sellers or mlghL you end up wlLh
shelves of unwanLed lLems?
Financial control
SomeLlmes sLaff can Lhlnk up Lhe mosL lngenlous ways of sllpplng cash ouL of Lhe Llll or sLock
lnLo Lhelr handbags ?ou need Lo conslder whlch are Lhe rlsks lnvolved ln Lhe Lype of buslness
you are conslderlng and whlch of Lhese rlsks glven your clrcumsLances you are prepared Lo
Lake 8emember lf you are Lo be a buslnessperson you have Lo be prepared Lo Lake some rlsk
Why noL? L could be LhaL you are acLually Laklng more rlsk by belng an employee Pundreds of
people are loslng [obs Lhrough no faulL of Lhelr own every day of Lhe week!
ow much will the business cost?
1o Lake Lhe exLreme lf you have a maxlmum of $10000 ln ready funds Lo lnvesL lL ls hardly
worLh looklng aL nurslng homes or hoLels for example Cn Lhe oLher hand a leasehold flower
shop may be a reallsLlc posslblllLy
%rade publications
,osL buslnesses have Lrade publlcaLlons llnd ouL whlch are Lhe besL ones for Lhe Lypes of
buslnesses you are Lhlnklng abouL buylng 8ead a few lssues 1hey are generally a good source
of lnformaLlon noL only for commenLary on Lhe ma[or concerns currenLly affecLlng LhaL
buslness secLor buL wlll also conLaln adverLlsemenLs for speclallsLs ln sLockLaklng flnanclng and
so on
`e^nS ^isk
LxLernal rlsks refer Lo rlsks exLernal Lo Lhe buslness lLself 1hese rlsks are largely ouLslde your
conLrol once you have boughL Lhe buslness and can lnclude all or some of Lhe followlng
ocation
Some buslnesses are very senslLlve Lo locaLlon (hoLels or general reLall for example) ?ou can
obvlously check whaL you Lhlnk of Lhe locaLlon before you buy buL Lhere can always be
envlronmenLal changes afLer you have boughL Lhe buslness LhaL you could noL have anLlclpaLed
and whlch fundamenLally affecL Lhe buslness ?our hoLel whlch was nlcely slLuaLed on a busy
road ls now ln a back sLreeL due Lo Lhe new bypass 1he handy publlc car park nexL Lo your
convenlence sLore has been sold Lo blg supermarkeL L could be even slmpler Lhe councll
decldes Lo puL double yellow llnes ln fronL of your parade of shops
%echnology
Changes and enhancemenLs Lo exlsLlng Lechnology could affecL your buslness ,any small
garages are unable Lo servlce some of Lhe laLesL cars whlch have sophlsLlcaLed compuLer and
elecLronlc sysLems new glzmos may appear and reduce Lhe demand for your servlces ulglLal
cameras are lncreaslngly reduclng Lhe demand for phoLograph developmenL and prlnLlng for
example
ompetition
AparL from Lhe lncreaslng Lrend Lowards ouLofLown ma[or ouLleLs maybe someone wlll [usL
declde Lo open up ln compeLlLlon [usL down Lhe road
Fashion
Some Lhlngs [usL slmply fade
ustomer loyalty
SomeLlmes cusLomer loyalLy ls losL when a buslness changes hands
Risk AnSysis:
8lsk analysls ls a Lechnlque Lo ldenLlfy and assess facLors LhaL may [eopardlze Lhe success of a
pro[ecL or achlevlng a goal 8lsk analysls ls Lhe sclence of rlsks and Lhelr probablllLy and
evaluaLlon A meLhod by whlch lndlvldual vulnerablllLles are compared Lo percelved or acLual
securlLy LhreaL scenarlos ln order Lo deLermlne Lhe llkellhood of compromlse of crlLlcal
lnformaLlon 1he process of deLermlnlng whaL beneflLs Lo offer and premlum Lo charge a
parLlcular group An evaluaLlon of Lhe feaslblllLy or probablllLy LhaL Lhe ouLcome of a pro[ecL or
pollcy wlll be Lhe deslred one usually conducLed Lo compare alLernaLlve scenarlos acLlon plans
or pollcles 8lsk analysls ls Lhe maLhemaLlcal calculaLlon lncludlng Lhe analysls of a hazard
(frequency magnlLude) and lLs consequences (damage poLenLlal) A documenLed assessmenL of
Lhe poLenLlal rlsks and vulnerablllLles Lo Lhe confldenLlallLy lnLegrlLy and avallablllLy of eP
and an esLlmaLlon of Lhe securlLy measures sufflclenL Lo reduce Lhe rlsks and vulnerablllLles Lo a
reasonable and approprlaLe level