•A financial plan must take into account the possibility of risks such as disability and premature...

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•A financial plan must take into account the possibility of risks such as disability and premature death may occur and aim to: –Eliminate them, or –Minimise their effect •A systematic approach should be taken to identify and manage these risks
Speculative risk •Arises where there is a chance of a loss or a gain •Examples: –Gambling; Once the bet is placed, there can only be a win or a loss –Setting up a business; The business will succeed or fail
Pure risk •Arises where there is only a
possibility of loss or no loss •Categories of pure risk –Personal –Property and (see next slide) –Liability •Common law – e.g. negligence •Statute law – e.g. faulty product •Contract – e.g. construction
Risk management process can be divided into 3 broad steps:
1. Identification and evaluation of potential risks –Identify possible losses and their costs
2. Management of identified risks –Seek to avoid and minimise risks 3. Program review –Regularly reassess to ensure ongoing protection

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Robert · Accepted Answer

Risk management is a new and dynamic field. Every company opts for risk management to save 
themselves from the future problems which will affect the company due to high degree of risks 
companies now a days has divided risks into two types’ speculative risk and pure risks. 
Speculative risks are those risks whose result is not fixed. The result can be gain also or loss also. 
These results are made by choices not by depending on circumstances (Boggs, 2008). Examples 
of speculative risk are gambling, common stock etc. in such business activities there is no 
certainty of profit or loss that a company or a person will incur. It can be a massive profit or a 
huge loss. Whereas, pure risks are risks in which there is possibility that either there will be loss 
or there will be no loss at all. There is no scope of earning gain to the company or any specific 
individual. Construction, property business, etc can be categories as examples of pure risks 
business. Pure risks are always insurable as compare to speculative risks (Diggs,

•A financial plan must take into account the possibility of risks such as disability and premature death may occur and aim to: –Eliminate them, or –Minimise their effect •A systematic approach should...

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