Professional Documents
Culture Documents
Risk
Risk
"state of mind" refers to an individual's emotional, psychological, and cognitive condition at a specific
moment. "state of the world" in various contexts typically refers to the current conditions,
circumstances, or situation that exists in the world at a given point in time.
Risk refers to the possibility of an adverse or undesired outcome occurring. On the other hand
Probability is a measure of the likelihood of an expected event or outcome occurring.
risk is undesired outcome or it is the possibility of loss. Peril, on the other hand, represents the specific
event or circumstance that can lead to a loss or damage. Hazard, in contrast, signifies the underlying
conditions or situations that elevate the probability of perils occurring.
Moral Hazard: - This originates from evil tendencies in the character of the insured person. Morale
Hazard: - This originates from acts of carelessness leading to the occurrence of a loss.
Pure risks refer to the situation in which only a loss or no loss would occur. Speculative risks, on the
other hand, The situation is characterized by a possibility of either a loss or a gain.
Fundamental risks affect the entire society or a large group of the population. Examples:
unemployment, inflation, war. Particular risks are those due to particular and specific conditions
They affect each individual separately Examples include: property losses, death, disability
Business Risk: - This the risk associated with the physical operation of the firm.
Financial Risk: - This is associated with debt financing.
Market Risk: - Market risk is related to stock market. It refers to stock price variability caused by
market forces
Interest Rate Risk: - This is a risk resulting from changes in interest rates. Purchasing power risk,
on the other hand, results from the erosion of the real value of money over time due to inflation.