Saturday, August 4, 2012

Categories of Risk for Risk Management Process

Categories of Risk

Categories of risk represent generic (original) risks. All other risks fall in one or two of the following categories of risk.

 

Fundamental Risk

Fundamental risk is the risk beyond the control of anyone,

 

Particular Risk

Particular risk can be avoided by taking preventative measures.

 

Speculative Risk

Speculative risk can result in bad as well as good outcome.

 

Pure Risk

Pure risk can only result in bad outcome.

 

Entrepreneurial Risk

Entrepreneurial risk is necessary to earn profits.

If there were no risk involved at all, then there would be no profits at all.

This risk is taken by an entrepreneur with a view to earn profits from business activity.

Entrepreneurial risk can be easily confused with speculative risk. However, speculative risk is taken by speculator with a view to earn profit from one off opportunity and there is usually no transfer of goods or services. Gains or losses are settled on net basis.