Risk and Risk-generating Events

Colin White and Miao Fan

Chapter 3 in Risk and Foreign Direct Investment, 2006, pp 23-40 from Palgrave Macmillan

Abstract: Abstract This chapter starts by indicating how necessary it is to bring together the disparate approaches to risk in a genuinely integrated manner which assimilates all risk factors and the different disciplinary approaches to risk. It defines what risk is and shows the universality of that risk with careful distinctions made between incidence, impact and response. The analysis shows how such risk-generating events might be classified. One method of classification is by the different levels at which risk arises and has to be controlled. The analysis then turns to the response to risk by considering the appetite for risk, or degree of risk aversion, of those confronting risk. Part of such an analysis is consideration of the nature of risk exposure for organisations and individuals, notably different stakeholder groups. In conclusion, the chapter analyses the connection between risk and return which is considered a positive one by financial theorists but paradoxically has appeared in the empirical data to be negative; successful organisations are able to increase returns and reduce risk simultaneously.

Keywords: Decision Maker; Foreign Direct Investment; Risk Aversion; Risk Premium; Prospect Theory (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-62483-2_3

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DOI: 10.1057/9780230624832_3

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