RSM100Y1 Chapter Notes -Risk Management, Installment Credit, Savings Account
Document Summary
Speculative risk: chance of profit or loss. Firm expands into a new market -> may experience higher profits or loss of invested funds. Pure risk: only the chance of loss. Motorists always face the risk of accidents; accident = loss, no accident = no profit. Risk management: calculations and actions a firm takes to recognize and deal with real or potential risks to its survival. Four alternatives in handling risk: avoid it, minimize it, assume it, or transfer it. When evaluating risk, consider nation"s economic stability, social and economic factors, available technologies, distribution systems, government regulations. Manufacturer builds production facility away from tornado and hurricane prone areas. > companies accumulate funds to cover potential losses. > insurance: contract where the insurer, for a fee, agrees to reimburse an insured firm or individual a sum of money if a loss occurs. > premium: insured party"s fee to the insurance company for coverage against losses.
