Comparison between a Calculated Risk and a Reckless Gamble
A calculated risk in business relates to a situation where careful considerations are made before making a decision. A great extent of personal and financial risks are some of the considerations made in a calculated risk. They are balanced by the possibility of benefits that will be realized after making the decision. The process of deciding a calculated risk is guided by set frameworks and business standards coupled with stakeholder consultations. On the other hand, a reckless gamble in the business context relates to deciding to undertake a particular course of action without showing or considering the impending consequences or dangers that will be the outcome. Any framework or principles do not guide a reckless gamble or decision.
Risk Tolerance in Business
Risk tolerance is simple terms refers to the level of financial risk that a business entity is willing to take in their financial planning for the business to get their initial investment and record a profit. Risk tolerance differs from one entity to the next, depending on the nature of the business environment and its initial investment. A business entity in the mining or aviation industry has a higher risk tolerance than a business in the hospitality industry since the initial investment and risks involved in the two enterprises are different. Therefore, making their risk tolerance similarly different as the business decisions in the industries mentioned above vary greatly based on their risk tolerance and financial risks involved in each entity. Enterprises with higher risk tolerance tend to have higher risks appetites, which translates to higher possibility returns or losses.
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