Rewarded risk

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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.

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.

See also