Page 45 - P5 Integrated Workbook TUTOR 2017-18
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Environmental influences




               3.7  Risk appetite of stakeholders


                               It is important to consider the risk appetite of stakeholders when
                               considering the most appropriate tool for decision making under
                               risk/uncertainty.



                              Shareholders                           Employees and managers
                  Commonly risk seeking. Prepared             Should act in the best interests of
                    to take a risk, hold a portfolio of        shareholders but:
                    investments to spread risk–                 May be risk averse if an
                    maximax suitable.                             unsuccessful outcome would
                  However, shareholders in a                     impact their remuneration or job
                    company in financial distress may             security – maximin preferred.
                    be more risk averse or neutral –            May be risk seeking if a bonus or
                    maximin or EVs suitable.                      reward is offered for a high
                                                                  outcome – maximax preferred.



                           Venture capitalists                                  Banks
                  Rational investors seeking                   Conservative approach to risk
                    maximum return for minimum                    aiming to secure funds/returns –
                    risk.                                         maximin (or perhaps EVs)
                  Hold a portfolio of investments,               suitable.
                    monitoring progress, agreeing an
                    exit strategy and placing
                    employees on the management
                    team – maximin suitable.







                  Illustrations and further practice


                  Now read Illustrations 9 and 10 from Chapter 2 of the Study Text














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