abhishreshthaa
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“Risk refers to Deviations from Expectations”.
Qualitative & Quantitative Approach to Risk Analysis
- Risk is often measured in terms of viability of returns.
- Expected Returns reflects the benefit an investor anticipates from investment.
- Required Returns reflects an investor demands for assuming risk.
- When Required rate of returns is greater than or equal to Expected returns with a predetermined amount of Risk the investment is attractive and vice-versa
Qualitative & Quantitative Approach to Risk Analysis
- Qualitative Approach – Adopted for subjective factors such as : management, environment etc.
- Quantitative Approach – Adopted for objective parameters such as: market, costs etc.
- Qualitative risk factors are sought to be addressed by suitable covenants.
- Sensitivity Analysis is done to study the impact of quantitative parameters on the project return and cost of capital.
- Structuring is done in a way as would ensure project viability.