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Risk Assessment
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Methodology that compares the risks inherent
in a project with standardized descriptive criteria. The usual goals are
to discover implicit risks, and to analyze portfolios for overall
strategic risks.
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Risk Management
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The process of identifying exposures to
various risks and taking steps to ameliorate those exposures with appropriate
actions.
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Financial Risk,
Investment Risk
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The risk involved in an undertaking that
can seen as a financial investment. That is, any project
that can result in a financial gain or loss.
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Probability Analysis
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Breaking up a projected result into the
likelihood of various individual outcomes or possibilities. The intent
is to obtain the ratio of a particular outcome to the total. The total
is usually taken to be probability = 1, so these probabilities are each
< 1.
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Options Analysis
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Breaking up the risk-reward forecast of
an opportunity among the series of decisions that will be made in the course
of project.
[see Dixit, A & Pindyk, RS. "The Options Approach to Capital
Investment", Seeing Differently: Insights on Innovation, JS Brown (ed)
[Harvard: 1997], p.85.]
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Confidence Level
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A statistical measure of the degree of certainty
of a calculation based on data, or by extension, of a forecast based on
assumed data.
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Monte Carlo Simulation
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The visualization of the profile of overall
risk where many dimensionsre of the problem can contribute to that risk
or uncertainty. A computer program randomly selects cases which set each
of the dimensions to one of its possible values. After many cases have been
evaluated, a profile that approximates all possible outcomes is created.
The shortcoming of current Monte Carlo techniques is that they do
not completely account for risk dimensions which strongly interact. For
instance, the poor risk of weak product performance may be greatly ameliorated
by bargain pricing!
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Disagree with our definition? Send us yours!
This is how the language is built.
TheInnovators@Inngenuity.com
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