Difference between revisions of "Rewarded risk"

From ACT Wiki
Jump to: navigation, search
m (Spacing and category added)
(Add links.)
 
(4 intermediate revisions by the same user not shown)
Line 1: Line 1:
A rewarded risk is one which is associated with an expected benefit for the party accepting the risk.
+
Rewarded and unrewarded risk can be a useful way to analyse risks.  
  
For example a greater net return (or a smaller net cost) for the party accepting the risk.   
+
It can indicate whether a particular risk is a legitimate risk for the organisation (and consistent with the organisation’s strategic plan) or not.
 +
 
 +
   
 +
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 shareholders' wealth.
  
So it may be rational - depending on the size and likelihood of the expected benefit, and the organisation's risk appetite and policy - to accept a rewarded risk.
 
  
  
 
== See also ==
 
== See also ==
 +
* [[Aggressive]]
 +
* [[Conservative]]
 
* [[Return]]
 
* [[Return]]
 +
* [[Risk appetite]]
 +
* [[Shareholder value]]
 +
* [[Strategic analysis]]
 
* [[Unrewarded risk]]
 
* [[Unrewarded risk]]
  
 
[[Category:Financial_risk_management]]
 
[[Category:Financial_risk_management]]

Latest revision as of 09:10, 14 July 2016

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 strategic plan) or not.


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 shareholders' wealth.


See also