Pure risk is a type of risk that cannot be controlled and has only negative outcomes. It is a risk that can only be avoided or transferred, not managed.
Pure risk, also known as absolute risk, is a type of risk that cannot be controlled or managed. It is a risk that has only one possible outcome: a loss. Pure risks are typically associated with natural disasters, such as floods, earthquakes, and hurricanes, as well as other events that are out of our control, such as death, disability, and illness.
Pure risks can be divided into two categories: speculative and non-speculative. Speculative risks involve the possibility of both gain and loss, while non-speculative risks involve only the possibility of loss. Examples of speculative risks include investing in stocks, gambling, and starting a business. Examples of non-speculative risks include natural disasters, death, and disability.
Pure risks can be managed through risk management techniques such as diversification, hedging, and insurance. Diversification involves spreading out investments across different asset classes to reduce the risk of loss. Hedging involves taking a position in the market that is opposite to the one taken in the original investment, in order to reduce the risk of loss. Insurance is a form of risk management that involves transferring the risk of loss to an insurance company in exchange for a premium.
Pure risks can have a significant impact on individuals, businesses, and society as a whole. For individuals, pure risks can lead to financial losses, emotional distress, and physical harm. For businesses, pure risks can lead to decreased profits, increased costs, and decreased customer loyalty. For society, pure risks can lead to economic losses, disruption of services, and increased demand for government assistance.
In conclusion, pure risk is a type of risk that cannot be controlled or managed and has only one possible outcome: a loss. Pure risks can be managed through risk management techniques such as diversification, hedging, and insurance. Pure risks can have a significant impact on individuals, businesses, and society as a whole.