Risk and uncertainty

Risk and uncertainty

1. Risk...

   • Risk: Chance that something positive may occur (AO1)
     • + investing £1 million into a new business (AO2)
   • - Reward outlines the possible return from taking a risk (AO1)
   • 1) Quantifiable risk: Type of risk that we can put a value on and also has an element of predictability (AO1)
     • + Theft of key equipment (AO2)
   • 2) Un-quantifiable risk: Unexpected events that we cannot put a value on and is unpredictable (AO1)
     • + Change in trend (AO2)
   • Reducing the level of risk...
     • - Diversify the customer base (AO1)
     • - Good planning (AO1)
     • - Good relationships with suppliers (AO1)
     • - Don't over pay on assets (AO1)

2. Uncertainty...

   • Uncertainty: The inability to calculate the pros or cons of a decision (AO1)
   • + Investing £1 million into a new business without being able to calculate potential profits (AO2)
   • Internal...
     • 1) Technical uncertainty (AO1)
     • 2) Stakeholder uncertainty (AO1)
     • 3) Organisational uncertainty (AO1)
   • External...
     • 1) Economic uncertainty (AO1)
     • 2) Political uncertainty (AO1)
     • 3) Competitive uncertainty (AO1)

3. - The business can plan for future problems (AO3)

4. - More likely to be financially better off in harder times (AO3)

5. - More money to advertise (AO3)

6. - Make decision making quicker (AO4)

7. - How well they can forecast future problems (AO4)

8. - Whether they can meet their objectives (AO4)