WHAT IS RISK

abhishreshthaa

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“Risk refers to Deviations from Expectations”.

  • 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.
 
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