Page 26 - 5.2 i. Manac Finance ITC Summarised Notes
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RISK MANAGEMENT
Overview of Risk
• Risk can be described as the probability that the actual
outcome will be different from the expected outcome.
• It is inevitable that risks will arise in the pursuit of
value creation because the outcome of events cannot
always be predicted with accuracy and a certain degree
of uncertainty always exists (consumer trends, etc.).
• Risk management entails minimising the possibility
that adverse events will occur as well as minimising
the adverse effects, should the event occur.
• An entity should only take on risk if the degree of risk is
compensated with the expected return.
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High risk = High expected return !!
