Risk Related Guides
Risks
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A risk is a potential for a loss. An opportunity is a potential for a gain. Most strategies and plans entail both risk and opportunity. As such, both play a role in decision making, strategy formation and management.
Risk vs OpportunityGenerally speaking, the goal of strategy is not to maximize opportunity and the goal of risk management is not to minimize risk. Both strategy and risk management seek to optimize total reward within the context of an organization or individual's risk tolerance.The future can't be predicted with absolute certainty and the risk-opportunity tradeoff is often a best guess or mathematical estimate.
Risk-Reward RatioThe risk-reward ratio is a common way to represent estimates of the risk vs opportunity tradeoff for a given strategy.|
| Risk | Opportunity | Definition | Potential for a future loss. | Potential for a future gain. |
Next: Opportunity Cost
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