Risk Management and the Five Stages
Risk arises from uncertainty of importance, while unimportant uncertaintydoes not give rise to risk. Therefore for risk to exist, the person ororganization evaluating risk must place some level of importance to theuncertainty being assessed. Risk management is the identification of anypotential risk, the evaluation of the level of importance associated withthe risk, and the identification of what, if any, action will be taken toreduce or eliminate the risk. The five steps in the risk-management 1. Risk Identification - Determine if risk actually exists, or if only 2. Risk Assessment - Determine the level of risk that exists (low, 3. Selection of Risk-management Techni
ques - Identify if, and how, risks can be managed. Ability to service loan commitments is not an issue. * MBA Student: Likely in a debt-incurring or asset-reducing mode at this life stage, since wage earning may need to be set aside for the duration of the MBA program, and expenses (living costs, tuition, books, etc. Earning potential further limited by schedule demands created by children, particularly if young (preschool). The conclusions that can be drawn are that assumptions made in assessingrisks must be verified, that advanced education can reduce risk, and thatage or maturity can reduce loan risks. purchase insurance) or retain the risk and live with the consequences. Implementation - Put the plan into action. Assessed Risk Level = Medium. The MBA may increase both likelihood of employment following program completion, as well as higher earnings. However student likely is older than college or university undergraduates, and has demonstrated a level of commitment to pursuing advanced education. A briefconclusion that draws from the analysis summarizes this assessment. * Single Mother: Stereotypically young in age, less educated than the general population, with low earning potential. Potentially possesses few assets of value, and any financial resources are invested in family necessities (food, clothing, shelter) and in support of children (toys, games, activities).
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,
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