Posts tagged business risk

Business Risk – he, who dares, wins… right? When making an investment of any kind, one key factor that needs to be looked at is risk versus reward. More importantly, how much risk can you handle? A person’s risk tolerance is closely linked with their willingness to invest.

So what is “risk”? In the context of business, “risk” is a concept that assigns a possible negative impact to an asset or something of value that may arise from some present process or future event. In everyday usage, “risk” is often used with the probability of a known loss.

Here is an example; if I invest my savings into something that could generate a profit for me, what is the possibility that I could loose some of it or even all of it? This is a very simple way of looking at it. For some people, the possibility of even losing 10% might be too much. If it is, clearly the risk is too high. For another person, the risk may be too low and would be prepared to loose all of it for potential profits.

This brings us to the risk versus reward scenario. Risk and reward go hand in hand and the potential reward and the probabilities may be high enough for you to raise your level of risk. In business, there is a constant battle of finding that balance between these two opposing forces.

Generally, the less the reward, the lower the risk and vice versa, although this is not always the case.

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