risk

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Risk

Often defined as the standard deviation of the return on total investment. Degree of uncertainty of return on an asset. In context of asset pricing theory. See: Systematic risk.

Risk

The uncertainty associated with any investment. That is, risk is the possibility that the actual return on an investment will be different from its expected return. A vitally important concept in finance is the idea that an investment that carries a higher risk has the potential of a higher return. For example, a zero-risk investment, such as a U.S. Treasury security, has a low rate of return, while a stock in a start-up has the potential to make an investor very wealthy, but also the potential to lose one's entire investment. Certain types of risk are easier to quantify than others. To the extent that risk is quantifiable, it is generally calculated as the standard deviation on an investment's average return.

risk

The variability of returns from an investment. The greater the variability (in dividend fluctuation or security price, for example), the greater the risk. Because investors are generally averse to risk, investments with greater inherent risk must promise higher expected yields.

Risk.

Risk is the possibility you'll lose money if an investment you make provides a disappointing return. All investments carry a certain level of risk, since investment return is not guaranteed.

According to modern investment theory, the greater the risk you take in making an investment, the greater your return has the potential to be if the investment succeeds.

For example, investing in a startup company carries substantial risk, since there is no guarantee that it will be profitable. But if it is, you're in a position to realize a greater gain than if you had invested a similar amount in an already established company.

As a rule of thumb, if you are unwilling to take at least some investment risk, you are likely to limit your investment return.

risk

see UNCERTAINTY AND RISK.

risk

Uncertainty regarding the possibility of loss.

References in periodicals archive ?
Based on the experience obtained in collecting the cost of failure, less than half a day's work can be spent in recording non-conformance information weekly.
The potential cost of failure is too appalling to contemplate.
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This feature on the cost of failure of new product development seemed to miss the crucial point of any marketing innovation.
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Jo Causon, director, marketing and corporate affairs at the CMI, said: "Now, more than ever, is the time to invest wisely because if organisations think that developing competence is expensive, they should also consider the cost of failure and mistakes.
And one of them added up to a pounds 10million cost of failure for Scottish football.
The cost of failure, in terms of council tax bills, is already high and is likely to rise still higher.
Last night's results mean AC Milan topped Champions League Group F and left O'Neill counting the cost of failure.
Looking at the previous regime, the true cost of failure emerged last week with the news of those enormous losses, including more than pounds 10million paid out to settle contracts.
The Tube Turns Tool-less[R] closure was developed over the last two years to meet the needs of the most demanding customer requirements in the energy field, where the cost of failure can be significant.
According to the firm, BT brings its tried and tested approach to cost transformation, which uses forensic analysis to redesign processes to remove inefficiency, reduce the cost of failure and improve customer experience.