Difference between revisions of "Introduction to entrepreneurship/IENT101/Nature/Risk"
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* Risk can be defined as the chance of loss. Generally, the higher the risk, the higher the potential for loss. <ref>www.stlouisfed.org/education_resources.</ref> | * Risk can be defined as the chance of loss. Generally, the higher the risk, the higher the potential for loss. <ref>www.stlouisfed.org/education_resources.</ref> | ||
| − | * A Reward is a positive incentive that makes people better off. <ref>www.stlouisfed.org/education_resources.</ref> | + | <span style="color:red">There are two elements to risk assessment: The likelihood that the bad thing will happen and the impact if the bad thing does happen. So maybe need to unpack 'the higher the risk...'.</span> |
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| + | * A Reward is a positive incentive that makes people better off. <ref>www.stlouisfed.org/education_resources.</ref> <span style="color:red">I can't click on the links to take me to the resources.</span> | ||
There is usually a direct relationship between the risk of a loss and the expected rate of return. The higher the risk of loss, the greater the potential reward. Conversely, the lower the risk of loss, the lower the potential reward. | There is usually a direct relationship between the risk of a loss and the expected rate of return. The higher the risk of loss, the greater the potential reward. Conversely, the lower the risk of loss, the lower the potential reward. | ||
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| + | <span style="color:red">Is this true? E.g. If the idea is a bad one there is a high risk of loss and not much potential for reward.</span> | ||
Revision as of 22:49, 8 October 2018
Anyone thinking about starting a new business or venture of any kind needs to think about possible risks and reward.
- Risk can be defined as the chance of loss. Generally, the higher the risk, the higher the potential for loss. [1]
There are two elements to risk assessment: The likelihood that the bad thing will happen and the impact if the bad thing does happen. So maybe need to unpack 'the higher the risk...'.
- A Reward is a positive incentive that makes people better off. [2] I can't click on the links to take me to the resources.
There is usually a direct relationship between the risk of a loss and the expected rate of return. The higher the risk of loss, the greater the potential reward. Conversely, the lower the risk of loss, the lower the potential reward.
Is this true? E.g. If the idea is a bad one there is a high risk of loss and not much potential for reward.
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References
