Types of Risk

Descrição

Topic 2
pntalarico
Mapa Mental por pntalarico, atualizado more than 1 year ago
pntalarico
Criado por pntalarico quase 11 anos atrás
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Resumo de Recurso

Types of Risk
  1. Financial risks
    1. Risks associated with the financial position of the firm and generally result from the concept of leverage
      1. Leverage
        1. The degree to which the business uses non-equity capital compared to equity capital
          1. Leverage = (non-equity capital) / (equity capital)
            1. Financial risk (both positive and negative) to a business increases with the use of non-equity capital
          2. Business risks
            1. Risks associated with production and marketing components of the business
              1. Market or price risks

                Anotações:

                • Relates to the uncertainty in markets and prices for both inputs (purchased for the production process), and outputs (products and services for sale by the firm)
                1. Production risk

                  Anotações:

                  • Is the variability inherent in the firm's production process
                  1. Technology risks

                    Anotações:

                    • These relate to the uncertainty caused by rapid technological change
                    1. Human risks

                      Anotações:

                      • Humans are a key source of risk.  Humans are prone to mistakes, misinterpretation, and health problems
                      • The fact that humans tend to change their goals and objectives often adds to the uncertainties facing the firm
                      1. Legal and social risks
                        1. Government policy risk

                          Anotações:

                          • In addition to the monetary, fiscal and trade policies, Commonwealth and State governments have various policies - both general and industry specific

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