StudentShare solutions
Triangle menu

Risk and its Importance - Coursework Example

Nobody downloaded yet

Extract of sample
Risk and its Importance

Essentially a company is indulging into risk management if it is actively analyzing and attempting to quantify the possible losses in a business decision or an investment and then is taking appropriate action to mitigate the possibility of those losses occurring. It is fairly important to manage risk in an investment appraisal process as it helps the organization in protecting itself from all kinds of risks; it helps the organization’s customers from large non-market related losses such as a firm failure or fraud. A strong risk management process does not only help the organization, but it also provides security to the overall industry. Importance of risk management can also be gauged by some recent crisis that has happened due to loopholes present in risk management strategies of a few companies. The financial meltdown of 2008 is a key example. b) Measuring risk and incorporating risk in an investment opportunity Risk management is now an essential part in all the businesses as more and more businessmen are facing the repercussions of a poorly managed business decision in terms of risk. With the financial crisis slowly recovering, it is harder for people to now ignore the importance of risk. Predominantly, risk is considered to be a negative term. It is the probability of a result deviating from its forecast, usually towards the negative side. Therefore, it is predominantly considered negative. However, in investment and financial terms, risk is always associated with return. The more risk a person or an entity is willing to take, the more the return is expected. Understanding risk today is perhaps one of the most important things in financial education and financial market. Its importance cannot be stressed more. A deviation from expected outcome can both be negative as well as positive. Therefore, the idea of ‘no pain, no gain’ works in harmony with this situation. If one is willing to undertake a certain amount of losses to ensure that they are the winner in the end in terms of returns, they are effectively managing their risk. Measuring risk in absolute terms is done through standard deviation. It is the basic tool for understanding the deviation of an outcome from a central tendency. A lot of other techniques are used; tools are incorporated in order to measure risk of an investment opportunity. There are a number of models through which firms decide upon the nature of risk that an investment opportunity might have. VaR is another tool; value at risk defines how bad things can go and its probability giving a certain level of confidence for a given amount of time. This helps to identify the potential losses that an investing entity might have if they take a certain decision, taking time and confidence of calculations into account. Incorporating risk in an investment opportunity is through taking into account the impact of risk on the outcome of the investment. Critical questions should be answered as the start of the investment appraisal such as the time, the expected return on investment or if the money invested could be used better in another investment opportunity. Beta is another measure through which risk associated with two different investment opportunities is measured. It is specific for a specific kind of project (Jackson, 2008). ...Show more

Summary

A paper "Risk and its Importance" claims that essentially a company is indulging into risk management if it is actively analyzing and attempting to quantify the possible losses in a business decision or an investment and then is taking appropriate action…
Author : cheaney
Risk and its Importance essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the coursework on your topic
"Risk and its Importance"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Feedback and its importance
Feedback is the message or response, which is given to the source from where the original message came. “Feedback is an important component of the formative assessment process” (Brookhart 1). Feedback produces an impact on the source of the message either positively or negatively.
2 pages (500 words) Coursework
Feedback and its importance
Types of feedback: There are various types of feedback such as positive or negative; qualitative or quantitative; formal or informal; written or verbal etc. It also includes effective, evaluative, motivational, and descriptive feedback. Importance of feedback: Feedbacks play a crucial role in the learning process, be it in an industry (i.e.
2 pages (500 words) Essay
Human Rootedness and Its Importance
Human Rootedness and Its Importance. People tend to give so much emphasis on the importance of sight that they consequently ignore the relevance of the other senses. From the earliest prominent philosophers until many of today’s respected thinkers, the idea being upheld is that vision is the greatest of the senses.
5 pages (1250 words) Essay
Cognitive dissonance and its Importance
They may do this by changing their perceptions to accept reality. They may alternatively seek information that confirms their beliefs so that the credibility of real experiences is reduced. Some may even ignore the information that challenges their beliefs.
3 pages (750 words) Essay
Fashion and its importance
This essay analyzes what is the importance of fashion. When seeking to define the term “fashion” from a dictionary, it is instantly deduced that the meaning is in reality different. In the Oxford Dictionary, fashion is defined as a popular trend of clothing, and manner of behavior. Some people take fashion more seriously, to them it is more than a trend.
6 pages (1500 words) Essay
Importance of Decision Making in Risk Management
Ethical principles are a way to make your mind up these issues. For commerce to be winning, goods or services require to be offer. They have to be desired by the public in order for commerce to occur. No doubt, the social everyday jobs of a trade are also vital to the success of an association.
3 pages (750 words) Essay
Marketing and its importance in Britain society
If each company projects a 10 percent growth in its sales and the total market is growing by only 3 percent, the result is excess capacity. This in turn leads to hyper competition. Competitors, desperate to attract customers, lower their prices and add giveaways.
10 pages (2500 words) Essay
Marketing and its importance in Britain society
If each company projects a 10 percent growth in its sales and the total market is growing by only 3 percent, the result is excess capacity. This in turn leads to hyper competition. Competitors, desperate to attract customers, lower their prices and add giveaways. These strategies ultimately mean lower margins, lower profits, some failing companies, and more mergers and acquisitions.
10 pages (2500 words) Essay
Feedback and its importance
It also includes effective, evaluative, motivational, and descriptive feedback. Feedbacks play a crucial role in the learning process, be it in an industry (i.e. in
2 pages (500 words) Essay
Importance of Having a Risk Plan
The team members of the Satellite Development project had already created a risk management which will help them to commence with the project without facing any problem. The success of the project is also dependent on the risk plan which when made correctly indicates all the weak points of the project that can cause obstacle in the due course of the processes.
3 pages (750 words) Assignment
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Click to create a comment