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Market risk and risk reduction
The total market risk a business faces is linked to its value chain and a consequence of the chosen strategy. Market risk is managed mainly through the strategic choices the business makes. Only through strategic risk taking will value be created. Therefore it is not desirable to remove all risk. What risks should be mitigated…
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What risk can and should be mitigated?
After having calculated its risk tolerance the business may come to the conclusion that the overall risk is more than the business can carry. In that case it might be necessary to mitigate some of the risk inherent in the business. But not all risk can or should be mitigated. The macro risk the business…
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Risk modelling
The strategic decisions of a business are based on plans and assumptions about how the future will develop. These assumptions are more or less uncertain, in fact, the only thing that is certain that the outcome will not be exactly as expected. A plan and the financial estimates it contains is a modelled representation of…
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Distinguish between events and estimates
Large public sector investment projects in Norway have to go through an established methodology for quality assurance. There must be an external quality assurance process both of the selected concept (KS1) and the projects profitability and cost (KS2). KS1 and KS2 Concept quality control (KS1) shall ensure the realization of socio-economic advantages (the revenue side…