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MGM101H5 (341)

Appendix D Notes (on Risk)

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James Appleyard

MGM Appendix D NotesUnderstanding Business RisksRisk management is about minimizing losses caused by unexpected eventsThose who do businesses in foreign countries are at risk of social unrestRapid change in technology and global conditions make risk management difficult and complexManaging RiskRisk is the chance of loss the degree of probability of loss and the amount of possible lossSpeculative loss is the chance of either loss or profitWhen taking on speculative loss the investor has to do a riskreward analysisPure risk is loss that has no chance of profitThis includes fire accident or shoplifting This loss requires insurance and will be the main topic of discussionFirms can reduce pure risk by implementing internal controls such as fire drills health education safety inspections equipment maintenance and surveillance camerasProduct recalls also lessen risk although it comes with a high costFirst step towards risk management is through these lossprevention programsAnother way of reducing risk is to not participate in risky activities at allExnot accepting hazardous jobs10 of GDP spent on insurance premiumsMany smalle
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