Even though there are whole industries built around Risk, such as the insurance industry, all businesses are always involved with risk. Businesses must look for profit opportunity, or course. But Risk means that for any decision you make in business, there is a possible loss. And of course, the leaders in a business are always the ones who make decisions about risk. If you understand business, you understand that it always involves risk. (And you also know that some small part of risk is always luck.)
If we work for a business owner, it is because at one time he or she took a risk. And to keep a business successful, its leaders must continue taking risks. Every time they hire an employee, they are taking a risk that that employee will perform.
Most employees do not understand that the owners of the companies take these risks. The leaders of the company, may have taken brave chances by putting their money, and often other people's money, into risks that were finally successful. These risks grew the company. Business leaders may be very careful, but to move the company forward they have to decide the products, the employees, and the markets for the company.
That is why English terms about Risk are important for business people. Here are a few:
Risk Factor - A necessary part of planning which indicates an area of uncertainty. "The weather is always a risk factor for farmers."
Risk Assessment - Judging the possible amounts and effects in a risk decision. "My Risk Assessment indicates the rewards for the investment are too low for the possible loss."
Risk Management - Deciding on the amount and kind of risks to be taken. "Judging how many swimming suits to buy for summer involves yearly risk management."
Risk Averse - Being careful about a possible loss instead of looking for an opportunity. "When I loan money to my wife's brother, I am quite Risk Averse, and I don't loan him much."
Risk Tolerance - How much possible loss for a business the leaders are willing to take. "Our owners' Risk Tolerance is not high enough to risk the costs of expanding the market."
Risk Limit - Limiting the amount of Risk to limit the possible loss. "We are going to set a risk limit on our new product development, so it has to be made for a small cost.."
Downside Risk - Deciding on the worst that can happen in a possible loss. "If the Downside Risk is that we loose the company, it is too much."
Risk-Reward Ratio - Deciding what value will come with success, against a possible loss. "If we would lose one Euro if we fail, but gain 40 Euros if we succeed, that is a good Risk-Reward Ratio."
Risk Exposure - How much possible loss an action could result in for a business. "Entering a totally new business with no knowledge of the market gives us too much Exposure."
Legal Risk - Risk of uncertainty in interpretation, or in effect, due to legal actions concerning an agreement, a law, or a regulation. "The new regulations protecting children make selling our toys a greater risk."
Many standard business practices,in fact, relate to Risk in some way:
Collateral - A loan to someone always has the risk that the person getting the loan will not be able to pay it back. Collateral is the value that the person getting the loan agrees to give up if he or she is unable continue paying back the loan within the required terms. "You will need to put in your house as Collateral for the loan."
Limited Liability - Certain kinds of business organizations are created to limit the risk of the business only to the items owned by that business, and cannot include owners giving up all their other possessions. "I have a Limited Liability company, so I won't lose my house."
Unsecured Debt - A loan made without offering enough Collateral to repay the loan if the borrower does not pay. "It is a small personal loan to my friend, so it is an unsecured debt."
Histories - The record of performance in loans and other risk situations. "Purchasing is a business activity which examines whether a supplier has a history of in delivering parts on time."
Option - A small risk, usually in cash, that give the buyer the opportunity to by the item at a later time at a decided cost, before it is offered to other buyers. "Our movie company has taken an Option on his new book."
One more thing that most business people know, and that is if you don't take a risk, sometimes that is the greatest risk of all.