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7 Types of Good Risk

A good risk is a risk that is attractive from the perspective of a society, organization or individual that it is taken in a calculated and managed way. All actions and inactions involve risk. As such, it is incorrect to think of risk as inherently bad. The following are examples of good risk.

Positive Risk

Positive risk is the potential for gains due to action or inaction. This is the opposite of regular risk. People tend to think of risk and opportunity as being completely separate concepts. Professionals who work with risk are more likely to model both of these as risk. In this context, risk can be negative and positive. For example, it is common for investment banks to view the potential for unexpected investment losses as downside risk and the potential for unexpected gains as upside risk.

Speculative Risks

Speculative risks are risks that are attached to a potential for reward. This is a normal type of risk. For example, crossing the street is a risk that may have rewards such as getting to school on time. Speculative risks can be contrasted with pure risks that have no potential for gain such as the risk of a fire in a house.

Calculated Risk

A calculated risk is a risk that is taken as a rational decision. This typically involves estimating the potential for loss and weighing this against the potential for gains. As a formal process this can be calculated and modeled using techniques such as risk-reward ratio.

Risk Tolerance

Risk tolerance is the amount of risk that a society, organization, group or individual is comfortable taking on. For example, a retiree with zero tolerance for losing their savings such that they must settle for investments that are relatively safe but low return.

Accepted Risk

In order for a risk to be "good" it must be accepted by those who are impacted by potential losses. Blindly taking uncalculated risks is generally a bad idea. Likewise, risks taken without informed consent are generally bad. For example, an investment advisor who takes excessive risks with a client's money without their knowledge.

Managed Risk

People often incorrectly assume that risk should be minimized. In fact, it is almost never a good idea to minimize risk because this tends to be expensive, impractical and creates large secondary risks. For example, to minimize your accident risk it would be best to stay in bed but this creates large secondary risks such as health risks. As such, each risk is not minimized but managed -- this can include simply accepting risks or treating them.

Fail Well

Fail well is the practice of designing things to fail quickly, cheaply and safety. This is a type of risk reduction that often occurs before risk management. In other words, risks can be designed-out as opposed to managed.


Risk can build resilience as a person or organization learns from failures to become stronger. For example, a firm that launches 30 products a year with 90% failing may be more resilient than a firm that launches one product a year and needs it to succeed.
Risk is an inescapable element of life such that avoiding risk only creates secondary risk.
Overview: Good Risk
A risk that is attractive from the perspective of a society, organization or individual that it is taken in a calculated and managed way.
Related Concepts


This is the complete list of articles we have written about risk.
AI Risk
Risk Avoidance
Brand Risk
Budget Risk
Business Risks
Change Risk
Compliance Risk
Concentration Risk
Cost Risk
Country Risk
Credit Risk
Demand Risk
Dread Risk
Economic Risk
Exchange Rates
Existential Risk
External Risk
Financial Risk
Force Majeure
Good Risk
Human Error
Risk Identification
Infinite Risk
Inflation Risk
Inherent Risk
Interest Rates
Internal Risks
Investing Risk
Legal Risk
Liquidity Risk
Model Risk
Moment Of Risk
Natural Disasters
Negative Risk
Operations Risk
Passive Risk
Personal Risk
Political Risk
Process Risk
Procurement Risk
Product Risk
Project Risk
Pure Risk
Quality Risk
Recession Risk
Risk Mitigation
Refinancing Risk
Regulatory Risk
Reputational Risk
Residual Risk
Resource Risk
Revenue Risk
Risk Appetite
Risk Aversion
Risk Examples
Risk Management
Risk Management Process
Risk Matrix
Risk Meaning
Risk Measurement
Risk Taking
Risk Tolerance
Risk Triggers
Risk vs Issue
Risk vs Opportunity
Risk vs Uncertainty
Risk-Reward Ratio
Seasonal Risk
Secondary Risk
Security Risk
Settlement Risk
Risk Sharing
Speculative Risk
Strategic Risk
Strategy Risk
Supply Risk
Systemic Risk
Tactical Risk
Taxation Risk
Technology Risk
Risk Transfer
Unforced Error
Upside Risk
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