Classification of Risks
Pure Risk vs Speculative Risks
Pure Risk
Liability Risks
Personal Risks
Risk of unemployment
Risk of poor health
Risk of old age
Risk of premature death
The amount of loss that can be involved has no maximum upper limit.
Property Risks
Direct loss such as fire damage to a home
Indirect loss such as the additional living expenses after a fire
Speculative Risks
Result in three possible outcomes : loss, no loss or gain for example gambling
Financial Risk vs Non-financial Risk
Financial risk exist where the outcomes can be measured in monetary terms.
Non-financial risk exists when the situation cannot be measured in monetary terms.
Enterprise Risk
Pure risk
Speculative risk
Strategic risk
Operational risk
Financial risk
Fundamental Risk vs Particular Risk
Fundamental Risk
Losses are suffered by large section of the society
Losses may be due to natural catastrophes, riots, epidemics
Relates to society at large
Particular Risk
Relates to one or few firms, factories or organization only
Losses are suffered by one or few more members of the society