About Lesson
Risk
- Risk implies future uncertainty about deviation from expected earnings or expected outcome.
- Various risks originate due to the uncertainty arising out of various factors that influence an investment or a situation.
- Risk is an environment in which possible outcomes and their respective probabilities are known.
- Under risk, the occurrence of future event can be predicted fairly accurately by specifying the level of probability.
Uncertainty
- Uncertainty is an environment in which possible outcomes and their respective probabilities are not known.
- For instance, when a farmer cannot envisage prices expect perhaps in term of some wide ranges rather than one or two figures, it is situation of uncertainty.
Steps of risk management
- Identification of risky events.
- Anticipation of the probable outcomes and their consequences.
- Taking action to obtain a preferred combination of risk and expected returns.
- Restoring the capacity of the producer to implement future risk planning strategies.