Concept and categories of risk

1. Topic:
Concept and Categories of Risk
Presented to: Sir Ahsan Khalique
Presented by: Mateen Altaf
Class: MBA (B&F) 6th semester
Subject: Risk Management & Insurance (8546)
mataltaf@hotmail.com
Allama Iqbal Open
University, Islamabad

2. Acknowledgment
First of all thanks to ALLAH, Who is most beneficent & the
most merciful, Whose blessings are abundant & favors are
unlimited.
It’s my pleasure to acknowledge the guidance and support of
my subject teacher Mr. “Ahsan Khalique” for her endless
guidance.

3. Introduction
 Risk is defined as uncertainty concerning the
occurrence of a loss.
 Risk is potential of losing something of value.
 Values (such as physical health, social status, emotional
well being or financial wealth) can be gained or lost
when taking risk resulting from a given action, activity
and/or inaction, foreseen or unforeseen

4. “A probability or threat of damage, injury, liabili
ty, loss, or any other negative occurrence that is
caused by external or internal vulnerabilities,
and that may be avoided through
preemptive action.”
(Source: James Green, Business Dictionary)

5. Peril:
Peril is define as the cause of loss. If your house burns because
of a fire, the peril, or cause of loss is fire.
Peril and Hazard
Hazard:
A hazard is a condition that creates or increase the chance of
loss.

6. Categories of Risk:
1. Pure Risk
Pure risk is defined as a situation in which, there are
only the possibilities of loss or no loss.
Examples of pure risks include premature death,
job-related accidents, catastrophic medical expenses,
and damage' to property from fire, lightning, flood, or
earthquake.

7. 2. Speculative risk
Speculative risks defined as a situation in which either
profit or loss is possible.
For example, if YOU purchase 100 shares of common
stock, you would profit if the price of the stock increases
but would lose if the price declines.

8. 3. Fundamental risk
A fundamental risk is a risk that affects the entire
economy or large numbers of persons or groups within
the economy.
Examples include, rapid inflation, cyclical
unemployment, and war because large numbers of
individuals are affected.

9. 4. Particular Risk
A particular risk is a risk that affects only individuals
and not the entire community.
Examples include car thefts, bank robberies, and
dwelling fires.
5. Enterprise risk
Enterprise risk is a term that encompasses all major risks
faced by a business firm. Such risks include pure risk,
speculative risk, strategic risk, operational risk, and
financial risk.

10. Conclusion
Risk is a situation involving exposure to danger. Risk is a
probability or threat of damage, injury, loss, or any
other negative occurrence that is caused by external or
internal vulnerabilities, and that may be avoided
through preemptive action.