Tashkent institute of finance department «state finance» presentation on the discipline “Finance” on the Theme

Theme 2.17. «Finance and risks»

Risk: loss and profit

Copyright © 2020 Ye. А. Akhunova

In many risk situations, the likely outcome of events can be simply and directly defined as unprofitable or profitable. Suppose, for example, that you are investing in the purchase of securities. If the value of your securities portfolio is reduced - this is a loss; if it rises, this is income. It is generally accepted that risk is an opportunity to incur losses, and not an opportunity to generate income.

However, there are situations in which it is not possible to clearly identify gains and losses. Let's go back to the party example. Uncertainty about the number of guests who can come to your party leads to a risk if there are more or less guests than expected. Thus, in some situations, any deviation from the expected value may be undesirable or costly.

The financial risk of an enterprise or a household is understood as the likelihood of adverse financial consequences in the form of loss of income, capital or financial assets in a situation of uncertainty in the conditions for carrying out its financial activities.