ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Risk is made up of two parts: the probability of something going wrong, and the negative consequences if it does. Risk can be hard to spot, however, let alone to prepare for and manage.

Detailed explanation-2: -In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environment), often focusing on negative, undesirable consequences.

Detailed explanation-3: -Probability – A risk is an event that “may” occur. The probability of it occurring can range anywhere from just above 0 percent to just below 100 percent. (Note: It can’t be exactly 100 percent, because then it would be a certainty, not a risk.

Detailed explanation-4: -1. Uncertainty: Risk exists if there is uncertainty about the future events or developments. 2. Financial damage: Risk exists if this uncertainty may cause a significant financial loss or in other way cause the firm’s financial performance to be below the planned level.

Detailed explanation-5: -Failure to use appropriate risk metrics. Mismeasurement of known risks. Failure to take known risks into account. Failure in communicating risks to top management. Failure in monitoring and managing risks.