√ Definition of Risk, Types, Sources and Examples (Discuss in full)
Definition of Risk, Types, Sources & Examples (Discuss in full) – In this discussion we will explain about Risk. Which includes the definition of risk, types of risk, sources of risk and examples of risks with complete and easy-to-understand discussion. For more details, please see the review below carefully.
Definition of Risk, Types, Sources & Examples (Discuss in full)
Let's first discuss the meaning of risk carefully.
Definition of Risk
Risk is a situation where there is uncertainty and the level of uncertainty can be measured quantitatively. Risk can also be interpreted as a state of uncertainty, which if something undesirable happens it can cause a loss. Risks related to this uncertainty occur due to the lack or unavailability of sufficient information about what will happen. Something that is uncertain (uncertain) can result in gains or losses.
All losses made individually or by a company are at risk. Business activity is closely related to risk. Risk in business activities is also associated with the amount of return that will be obtained by risk takers. The greater the risk faced, it can often be calculated if the returns obtained will also be greater.
Types of Risk
There are two types of risk in general put forward by Hanafi (2006:6)
Pure Risk
Pure risk is the uncertainty that a loss will occur or in other words there is only an opportunity to lose and not an opportunity to gain. Pure risk is a risk which if it occurs will result in a loss and if it does not occur then it does not cause a loss but also does not generate a profit. This risk results in only two kinds of losses or break events, such as theft, accidents or fire.
Speculative Risk
Speculative risk is the risk associated with the occurrence of two possibilities, namely the opportunity to experience financial loss or gain. This risk results in three types: loss, profit or break event. For example, investing in stocks on the stock exchange, buying sweepstakes and so on.
According to Jorion (1997) there are two types of risk in a company, namely:
Business Risk
Business risk is the risk borne by the company on the quality and excellence of several market products owned by the company. This kind of risk exists because there is uncertainty in business activities such as technological innovation as well as product design and marketing.
Strategic Risk
Strategic risk arises because there is a fundamental change in the economic or political environment. Strategic risk can be estimated. This risk relates to losses that may be encountered in financial markets, such as losses due to movements in interest rates or failures (defaults) on financial bonds. On the basis of the likelihood of occurrence of risks (likelihood) and the resulting consequences (consequences), risks can be classified into 4 types, namely:
- Unacceptable Risk: That is unacceptable risk and must be removed or if possible transferred to another party
- Undesirable Risk: That is a risk that requires risk management/mitigation to an acceptable level
- Acceptable Risk: That is an acceptable risk because it does not have a large impact and is still within acceptable limits.
- Negligible Risk: This is a risk whose impact is so small that it can be ignored
Risk Sources
Sources of risk According to Godfrey (1996) there are sources of risk that must be known and identified as a first step in dealing with risk, namely:
-
Politics
Example: Government policies, public opinion, changing ideologies, regulations, war chaos, terrorism, riots -
Environment
Example: Pollution, noise, licensing, public opinion, policies within the company, legislation related to the environment, environmental impacts -
Planning
Example: Licensing requirements, policies and practices, land use, social and economic impacts, public opinion. -
Marketing
Example: Demand (estimated), competition, obsolescence, consumer satisfaction, fashion -
Economics
Example: Financial policy, taxation, inflation, interest rates, exchange rates -
Finance
Example: Bankruptcy, profit, insurance, risk share -
Natural (Natural)
Example: Ground conditions not as expected, weather, earthquakes, fires and explosions, findings of archaeological sites -
Project
Example: Definition, strategy, procurement, requirements for work, leadership standards, organizational maturity, commitment, competence and experience, planning and quality control, work plan, manpower and resources, communication and culture. -
Technical
Example: Completeness of the design, operational efficiency, reliability -
Human (Human)
Example: Errors, incompetence, negligence, fatigue, communication skills, culture, working in dark or night conditions -
Criminal (Criminal)
Example: Lack of security, vandalism, theft, fraud, corruption, extortion -
Safety
Example: Occupational health and safety regulations, hazardous substances, collisions, collapses, floods, fires and explosions.
Thus has been explained about Definition of Risk, Types, Sources & Examples (Discuss in full), hopefully can add to your insight and knowledge. Thank you for visiting and don't forget to read other articles.
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