BU353 Chapter Notes - Chapter 1: Forego, Marginal Cost, Enterprise Risk Management
Document Summary
A fundamental distinction between today and our past is the active management of risk. Risk is any situation where there is uncertainty about what outcome will occur. In other situations, the term risk may refer to the expected value of the outcome. Risk is sometimes used in a specific sense to describe variability around the expected value and other times to reflect greater expected losses, due to either a higher probability of loss or a higher value of loss. Earnings risk refers to the potential fluctuation in a family"s earnings. Longevity risk refers to the possibility that retired people will outlive their financial resources. Business risk management is concerned with possible reductions in business value from any source. Unexpected changes in expected future net cash flows are a major source of fluctuations in business value. Hazard risk those that pose a threat to life, health, property, or the environment.
