Business people operate and make decisions in a risky environment every day. The consequences of their decisions are generally not known when the decisions are made. Furthermore, the outcome may be better or worse than expected. Price fluctuations and unpredictable sales are the biggest sources of risk for most businesses. Additionally, technological changes, legal and social concerns and human factors contribute significantly to risk business people have to face. A business person is most concerned with availability of goods and services for sale and availability of consumers and customers for the goods and services at a reasonable price.
Risk is thus the imperfect knowledge where the probabilities are not known. Other people view uncertainity as imperfect knowledge and risk as uncertain consequences. Risk management can thus be viewed as choosing among alternatives to reduce the effects of risk. For this to be achieved there will have to be a tradeoff between changes in risk, expected returns and entrepreneurial freedom. It is critical that the focus be on risk that matters. For a business person risk management will involve finding the preferred combination of goods and services with uncertain outcomes and varying level of expected returns. Risk management is thus the act of choosing among alternatives for reducing the effects of risk in business which in turn effects the businesses welfare position. Risk management strategies can 1) reduce risk within the operation, such as product diversification, 2) transfer risk outside the operation, such as production contracting or 3) build the operation’s capacity to bear risk, such as maintaining liquid assets.
essay代写 Assessing risk and uncertainty management methods