Accepting Risk

AAA

DEFINITION of 'Accepting Risk'

A risk management method used in the business or investment field. Accepting risk occurs when the cost of managing a certain type of risk is accepted, because the risk involved is not adequate enough to warrant the added cost it will take to avoid that risk.

INVESTOPEDIA EXPLAINS 'Accepting Risk'

Many businesses use risk management techniques to correctly identify, assess and prioritize risk, in order to effectively minimize, monitor and control the risk, in addition to finding out how the risk will increase the expense involved in avoiding it. Types of risks include uncertainty in financial markets, project failures, legal liabilities, credit risk, accidents, natural causes and disasters, and overly aggressive competition.

RELATED TERMS
  1. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. ...
  2. Systematic Risk

    The risk inherent to the entire market or entire market segment. ...
  3. Country Risk

    A collection of risks associated with investing in a foreign ...
  4. Credit Risk

    The risk of loss of principal or loss of a financial reward stemming ...
  5. Risk

    The chance that an investment's actual return will be different ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in ...
Related Articles
  1. 5 Things To Know About Asset Allocation
    Investing Basics

    5 Things To Know About Asset Allocation

  2. The Advantages Of Bonds
    Investing

    The Advantages Of Bonds

  3. Corporate Bonds: An Introduction To ...
    Bonds & Fixed Income

    Corporate Bonds: An Introduction To ...

  4. Introduction To Investment Diversification
    Investing Basics

    Introduction To Investment Diversification

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center