ABSTRACT
Risk is pervasive in human activity. The most commonly accepted definition is that risk is the potential that a certain action will lead to an undesirable effect. While the word risk has a negative connotation in the English language, undesirable effects can be either positive or negative (Leitch, 2010). In the business sector, risks have real monetary and operational impact. Every enterprise, by joining the market, implicitly agrees to carry risk as a matter of business. Risks vary by sector, by type of organizational structure and by (perceived) severity. Experts seem to agree on two broad types of risk: diversifiable and systematic. The former type a firm can hedge away, or reassign (outsource); the latter it cannot and must be dealt explicitly within a firm’s business plan. Both kinds of risk must be taken into account in a management plan, but are treated differently. New ventures typically carry higher risks for investors.
