10. Risk & Uncertainty:
Level of Uncertainty: Characteristic: Example:
Totally Certain
Outcomes can be
predicted with precision.
Physical laws, natural
sciences.
Objectively Uncertain
Outcomes are identified
and probabilities are
known.
Games of chance, cards,
dice.
Subjectively Uncertain
Outcomes are identified
but probabilities
unknown.
Fire, motorcar accidents,
investments.
Totally Uncertain
Outcomes are not fully
identified and
probabilities are
unknown.
Space exploration, genetic
research.
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12. Peril relates to the source of loss, e.g. Fire,
explosion, storm, earthquake, etc...
A peril gives rise to risk but are not defined as
hazard themselves
Hazard relates to the agent surrounding the
cause of loss, e.g.The oil drums inside the
warehouse that caught fire
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13. Pure risks only have possibility of loss
(destruction of a building due to fire)
Speculative risks have the possibility of either
profit or loss (profit making venture)
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14. Most pure risks are insurable (destruction of
building due to fire), but not all (destruction
of building due to war)
Surprisingly few risks are insurable
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15. Fundamental risks arise when a multitude of losses
can be traced to a single source in origin and in
consequence
Most fundamental risks such as war and recession
originate in the economic, political or social
interdependency of society.
Particular risks give rise to losses that have their origin
in discrete events, which are essentially personal in
cause (damage to a building, etc)
Fundamental / particular classification depends on
judgement
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16. Systematic risks are market related risks (e.g.
Rand value against dollar value)... In other
words the risk of a total system collapse...
Decrease in company share value after an
announcement from the CEO is a
unsystematic risk
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