Rewarded risk: Difference between revisions
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imported>Doug Williamson (Align with Unrewarded risk page.) |
imported>Doug Williamson (Link with Strategic analysis and Shareholder value pages and mention 'strategic plan' explicitly.) |
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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 | 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. | 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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== See also == | == See also == | ||
* [[Return]] | * [[Return]] | ||
* [[Shareholder value]] | |||
* [[Strategic analysis]] | |||
* [[Unrewarded risk]] | * [[Unrewarded risk]] | ||
[[Category:Financial_risk_management]] | [[Category:Financial_risk_management]] | ||
Revision as of 17:03, 23 March 2015
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 shareholder wealth.
