Unrewarded risk - Revision history

imported>Doug Williamson: Mend link.

2021-08-16T01:19:03Z

Mend link.

← Older revision		Revision as of 01:19, 16 August 2021
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	* [[Shareholder value]]		* [[Shareholder value]]
	* [[Strategic analysis]]		* [[Strategic analysis]]
	* [[~~Undiversifiable~~ risk]]		* [[Systematic risk]]

	[[Category:Risk_frameworks]]		[[Category:Risk_frameworks]]

imported>Doug Williamson: Add links.

2021-08-16T01:17:46Z

Add links.

← Older revision		Revision as of 01:17, 16 August 2021
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	* [[Aggressive]]		* [[Aggressive]]
	* [[Conservative]]		* [[Conservative]]
			* [[Diversifiable risk]]
	* [[Investment]]		* [[Investment]]
	* [[Operational risk]]		* [[Operational risk]]
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	* [[Shareholder value]]		* [[Shareholder value]]
	* [[Strategic analysis]]		* [[Strategic analysis]]
			* [[Undiversifiable risk]]

	[[Category:Risk_frameworks]]		[[Category:Risk_frameworks]]

imported>Doug Williamson: Add links.

2016-07-14T09:10:58Z

Add links.

← Older revision		Revision as of 09:10, 14 July 2016
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	== See also ==		== See also ==
			* [[Aggressive]]
			* [[Conservative]]
	* [[Investment]]		* [[Investment]]
	* [[Operational risk]]		* [[Operational risk]]

imported>Doug Williamson: Make shareholders plural.

2015-03-23T17:14:15Z

Make shareholders plural.

← Older revision		Revision as of 17:14, 23 March 2015
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	An example of a rewarded risk is a capital investment decision, such as acquiring a business or a new machine, launching a new product and so on.		An example of a rewarded risk is a capital investment decision, such as acquiring a business or a new machine, launching a new product and so on.

	Such an investment will be made because there is a reasonable expectation of an acceptable net positive return within the organisation's strategic plan, and hence an expectation of an increase in ~~shareholder~~ wealth.		Such an investment will be made because there is a reasonable expectation of an acceptable net positive return within the organisation's strategic plan, and hence an expectation of an increase in shareholders' wealth.

imported>Doug Williamson: Align with Rewarded risk page.

2015-03-23T17:06:30Z

Align with Rewarded risk page.

← Older revision		Revision as of 17:06, 23 March 2015
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	Rewarded and unrewarded risk can be a useful way to analyse risks.		Rewarded and unrewarded risk can be a useful way to analyse risks.

	It can indicate whether a particular risk is a legitimate risk for the organisation (and consistent with the organisation’s ~~strategy~~) or not.		It can indicate whether a particular risk is a legitimate risk for the organisation (and consistent with the organisation’s strategic plan) or not.


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	An example of a rewarded risk is a capital investment decision, such as acquiring a business or a new machine, launching a new product and so on.		An example of a rewarded risk is a capital investment decision, such as acquiring a business or a new machine, launching a new product and so on.

	Such an investment will be made because there is a reasonable expectation of an acceptable net positive return, and hence an expectation of an increase in shareholder wealth.		Such an investment will be made because there is a reasonable expectation of an acceptable net positive return within the organisation's strategic plan, and hence an expectation of an increase in shareholder wealth.


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	* [[Investment]]		* [[Investment]]
	* [[Operational risk]]		* [[Operational risk]]
			* [[Return]]
			* [[Shareholder value]]
			* [[Strategic analysis]]

	[[Category:Risk_frameworks]]		[[Category:Risk_frameworks]]

imported>Doug Williamson: Note the lost opportunity dimension to cost.

2015-03-23T16:40:03Z

Note the lost opportunity dimension to cost.

← Older revision		Revision as of 16:40, 23 March 2015
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	Examples of unrewarded risk are operational risks such as the risks of systems failure, fire, theft or human error, all of which may be costly to manage, and which there is no direct return for taking.		Examples of unrewarded risk are operational risks such as the risks of systems failure, fire, theft or human error, all of which may be costly to manage, and which there is no direct return for taking.

	Clearly risk which is unrewarded is best avoided where there is no cost to doing so. However, many unrewarded risks, such as the risk of fire, theft or human error, are inevitable in business, and must be managed as cost-effectively as possible.		Clearly risk which is unrewarded is best avoided where there is no cost or lost opportunity from doing so. However, many unrewarded risks, such as the risk of fire, theft or human error, are inevitable in business, and must be managed as cost-effectively as possible.

	For example by comparing insurance providers in order to get the best deal.		For example by comparing insurance providers in order to get the best deal.

imported>Doug Williamson: Add 'human error' as a category of unrewarded risk.

2015-03-23T16:31:29Z

Add 'human error' as a category of unrewarded risk.

← Older revision		Revision as of 16:31, 23 March 2015
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	== Unrewarded risk ==		== Unrewarded risk ==

	Examples of unrewarded risk are operational risks such as the risks of systems failure, fire or ~~theft~~, all of which may be costly to manage, and which there is no return for taking.		Examples of unrewarded risk are operational risks such as the risks of systems failure, fire, theft or human error, all of which may be costly to manage, and which there is no direct return for taking.

	Clearly risk which is unrewarded is best avoided where there is no cost to doing so. However, many unrewarded risks, such as the risk of fire or ~~theft~~, are inevitable in business, and must be managed as cost-effectively as possible.		Clearly risk which is unrewarded is best avoided where there is no cost to doing so. However, many unrewarded risks, such as the risk of fire, theft or human error, are inevitable in business, and must be managed as cost-effectively as possible.

	For example by comparing insurance providers in order to get the best deal. The cost of managing unrewarded risks must be covered by (and thus reduces) the net positive returns earned from rewarded risks.		For example by comparing insurance providers in order to get the best deal.

			The cost of managing unrewarded risks must be covered by (and thus reduces) the net positive returns earned from rewarded risks.


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	* [[Investment]]		* [[Investment]]
	* [[Operational risk]]		* [[Operational risk]]
	* [[Rewarded risk]]

	[[Category:Risk_frameworks]]		[[Category:Risk_frameworks]]

imported>Doug Williamson: Link with Investment and Operational risk pages.

2015-03-23T16:23:19Z

Link with Investment and Operational risk pages.

← Older revision		Revision as of 16:23, 23 March 2015
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	For example by comparing insurance providers in order to get the best deal. The cost of managing unrewarded risks must be covered by (and thus reduces) the net positive returns earned from rewarded risks.		For example by comparing insurance providers in order to get the best deal. The cost of managing unrewarded risks must be covered by (and thus reduces) the net positive returns earned from rewarded risks.




	== See also ==		== See also ==
			* [[Investment]]
			* [[Operational risk]]
	* [[Rewarded risk]]		* [[Rewarded risk]]

	[[Category:Risk_frameworks]]		[[Category:Risk_frameworks]]

imported>Doug Williamson: Update and expand for clarity. Source: ACT CertT.

2015-03-23T16:20:10Z

Update and expand for clarity. Source: ACT CertT.

← Older revision		Revision as of 16:20, 23 March 2015
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	An unrewarded risk ~~is one which is not directly associated with any benefit for the party accepting the risk~~.		Rewarded and unrewarded risk can be a useful way to analyse risks.

	~~So it~~ is ~~never rational - in terms of profit maximisation - to accept an unrewarded~~ risk ~~if it can be avoided~~.		It can indicate whether a particular risk is a legitimate risk for the organisation (and consistent with the organisation’s strategy) or not.


	The concept of rewarded and unrewarded risks can be a very useful way to analyse risks, as it can indicate whether a particular risk is a legitimate business risk (and therefore consistent with the business strategy) or not.

	An example of a rewarded risk is a ~~business~~ investment decision, such as ~~an acquisition~~ or ~~the purchase of~~ a new machine, ~~launch of~~ a new product and so on~~. Such an investment~~		== Rewarded risk ==
	~~will be made because there is a reasonable expectation of a return, and hence ultimately an expectation of an increase in shareholder wealth~~.
			An example of a rewarded risk is a capital investment decision, such as acquiring a business or a new machine, launching a new product and so on.

			Such an investment will be made because there is a reasonable expectation of an acceptable net positive return, and hence an expectation of an increase in shareholder wealth.

	~~Examples of unrewarded risk are operational risks such as the risks of systems failure, fire or theft, all of which may be costly to manage, and for which there is no direct return for taking.~~

	~~Clearly~~ risk ~~which is unrewarded is best avoided where there is no cost to doing so.~~		== Unrewarded risk ==

			Examples of unrewarded risk are operational risks such as the risks of systems failure, fire or theft, all of which may be costly to manage, and which there is no return for taking.

			Clearly risk which is unrewarded is best avoided where there is no cost to doing so. However, many unrewarded risks, such as the risk of fire or theft, are inevitable in business, and must be managed as cost-effectively as possible.

	~~However, many~~ unrewarded risks~~, such as fire and theft, are inevitable in business, and~~ must be ~~managed as cost-effectively as possible~~.		For example by comparing insurance providers in order to get the best deal. The cost of managing unrewarded risks must be covered by (and thus reduces) the net positive returns earned from rewarded risks.

	~~The cost of managing unrewarded risks must be covered by (and thus erodes) the returns earned from rewarded risks.~~

imported>Doug Williamson: Improve wording to align with ACT course materials MCT 4.1.3, 1 April 2012, p13.

2014-09-04T12:41:07Z

Improve wording to align with ACT course materials MCT 4.1.3, 1 April 2012, p13.

← Older revision		Revision as of 12:41, 4 September 2014
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	An unrewarded risk is one which is not associated with any benefit for the party accepting the risk.		An unrewarded risk is one which is not directly associated with any benefit for the party accepting the risk.

	So it is never rational - in terms of profit maximisation - to accept an unrewarded risk.		So it is never rational - in terms of profit maximisation - to accept an unrewarded risk if it can be avoided.


	~~This~~ can be a very useful way to analyse risks, as it can indicate whether a particular risk is a legitimate business risk (and therefore consistent with the business strategy) or not.		The concept of rewarded and unrewarded risks can be a very useful way to analyse risks, as it can indicate whether a particular risk is a legitimate business risk (and therefore consistent with the business strategy) or not.

	An example of a rewarded risk is a business investment decision, such as an acquisition or the purchase of a new machine, launch of a new product and so on. Such an investment		An example of a rewarded risk is a business investment decision, such as an acquisition or the purchase of a new machine, launch of a new product and so on. Such an investment
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	Examples of unrewarded risk are operational risks such as the risks of systems failure, fire or theft, all of which may be costly to manage, and for which there is no return for taking.		Examples of unrewarded risk are operational risks such as the risks of systems failure, fire or theft, all of which may be costly to manage, and for which there is no direct return for taking.

	Clearly risk which is unrewarded is best avoided where there is no cost to doing so.		Clearly risk which is unrewarded is best avoided where there is no cost to doing so.
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	* [[Rewarded risk]]		* [[Rewarded risk]]

	[[Category:~~Managing_Risk~~]]		[[Category:Risk_frameworks]]