Difference between revisions of "Rewarded risk"

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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.
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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.  
 
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.
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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 ==
 
== See also ==
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* [[Aggressive]]
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* [[Conservative]]
 
* [[Return]]
 
* [[Return]]
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* [[Risk appetite]]
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* [[Shareholder value]]
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* [[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