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Risk and the risk management process
3.4 Generic or Specific
Business risks can be either generic, that is the risk affects all businesses, or specific
to individual business sectors.
e.g. changes in the interest rate, non- compliance with company law
3.5 The concept of related risk factors
Related risks – are risks that vary because of the presence of another risk or where
two risks have a common cause.
Risk correlation is a particular example of related risk.
Positively correlated – risks that are positively related in that one will fall with the
reduction of the other, and increase with the rise of the other.
Negatively correlated risks are those that if one rose as the other fell
Illustrations and further practice
Now try TYU question 2 and 3
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