- Created by: Chloe_1709
- Created on: 01-12-18 19:03
Risks and Uncertainty
Risk: quantifiable - the probability of something occurring, expect changes.
Uncertainty: cannot be calculated, unpredictable BUT have awareness of it = difficult for businesses and government to plan
RISK ≠ UNCERTAINTY
Shocks: unexpected events, unpredictable, have major impact on the economy.
Shocks create changes which require time to adjust to - Time lag
Exchange rates: volatile = small shocks. Changes in the exchange rate can affect profit, income and employment opportunities.
Forward market reduces uncertainties in buying currency - insured against unexpected changes = allow businesses to be flexible + plan ahead
Insurance protects against unforeseen events, a COP, pay and compensation.
Insurance companies buy bonds + shares = source of investment finance (public + private)