Examples of risk aversion in the following topics:
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- To be slightly more specific, Frank Knight and Peter Drucker define entrepreneurship in terms of risk-taking.
- Risk - Measured statistically and often planned for, risks are simply the probabilities of unfavorable outcomes compared to the desired objectives.
- Ambiguity - A risk that is not measurable, ambiguity is the scenario in which objectives and relative risks are known, but not the likelihood of an outcome.
- The objective is known, but the context of risk is completely unknown.
- Any of these three risk scenarios are stressful for many people, and it it is important to understand your own risk aversion before entering into a small business ownership situation.
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- Framing effects arise because one can frequently frame a decision using multiple scenarios, wherein one may express benefits either as a relative risk reduction (RRR), or as absolute risk reduction (ARR).
- Extrinsic control over the cognitive distinctions (between risk tolerance and reward anticipation), adopted by decision makers, can occur through altering the presentation of relative risks and absolute benefits.
- When decision options appear framed as a likely gain, risk-averse choices predominate.
- A shift toward risk-seeking behavior occurs when a decision maker frames decisions in negative terms or adopts a negative framing effect.
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- Merchants with very low average transaction prices or very high average transaction prices are more averse to accepting credit cards.
- Finally, merchants assume the risk of chargebacks by consumers.
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- IT risk relates to the business risk associated with the use, ownership, operation, involvement, and adoption of IT within an enterprise.
- Risk is the product of the likelihood of an occurrence times its impact (Risk = Likelihood x Impact).
- IT risk management can be viewed as a component of a wider enterprise risk management (ERM) system.
- IT risk transverses all four of the aforementioned categories and should be managed within the framework of enterprise risk management.
- Risk appetite and risk sensitivity of the whole enterprise should guide the IT risk management process.
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- Risk management (i.e. foreign exchange risks, interest rates, hedging commodities, derivatives)
- Credit Risk – Risk that a borrower may not return the entirety of the payment owed.
- Liquidity Risk – Risk that an acquired asset cannot be traded quickly enough to capture profit.
- Market Risk – Virtually any capital asset has a market, and is therefore subjected to the risks of it's respective market.
- Operational Risk – Risk that an operational issue will diminish returns.
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- Political and legal risks are two very important aspects of running a business of which an entrepreneur should be aware.
- Failure to recognize these risks and adjust accordingly could potentially hinder the performance of the overall business.
- Political risk is generally defined as the risk to business interests resulting from political instability or political change.
- Political risk exists in every country around the globe and varies in magnitude and type from country to country.
- Governments may also offer political risk insurance to promote exports or economic development.
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- The biggest challenge companies face in tackling IS security risks is the growing sophistication of hackers and other cyber-criminals.
- We discuss Internet risks in the next section.
- The risks and particular regulations that apply may vary depending on the types of services offered.
- It is clear that no single risk management strategy can completely eliminate the risks associated with Internet use and access.
- Some businesses whose products or services directly or indirectly impact the economy or the health, welfare or safety of the public have begun to use cyber risk insurance programs as a means of transferring risk and providing for business continuity.
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- Email represents a potential IT risk and entry point for hackers, and so IT teams must integrate appropriate safeguards.
- As a result, protecting the inboxes of the employees at an organization is critical to minimizing this risk.
- As the world grows more and more digitally connected, the risks will continue to elevate.
- Being aware of the risks and investing in a strong IT infrastructure is key to mitigating the potential risks.
- Understand the risks associated with organizational email systems and the tools available to offset those risks
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- Under recourse factoring, the client is not protected against the risk of bad debts.
- Counter party credit risk: risk covered debtors can be re-insured, which limit the risks of a factor.
- Trade receivables are a fairly low risk asset due to their short duration.
- A fraud insurance policy and subjecting the client to audit could limit the risks.
- Explain the business of factoring and assess the risks of the involved parties
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- Legal risk is the risk arising from failure to comply with statutory or regulatory obligations (http://www.ffiec.gov).
- In order to minimize exposure to legal risks arising from confusion and excess cost, a company should seek legal advice if possible.
- Shahira and her small business of running a sewing company faces different political and legal risk than those of a larger company, she is still liable and must understand the laws and regulations that she may face in any country.