Risk acceptance involves consciously deciding to take on a risk, often because the potential reward outweighs the potential negative consequences and aligns with an individual or organization’s risk tolerance. It is an important part of risk management, as it is often necessary to accept some level of risk in order to pursue opportunities and achieve goals. Risk acceptance is a common approach to managing risk, as it is impossible to achieve success without taking some level of risk. The following are a few examples:
Most investments involve some level of risk.
The entire insurance industry is based on assuming risk for a fee.
Derivatives are contracts that derive their value from an underlying entity such as exchange rates. They are often used to transfer risk between businesses for a fee.
Projects are an investment that a business makes to achieve its goals such as launching new products or services. Projects involve risks such as the potential for cost overruns.
Any equity you own in a business is typically at risk. Such risks are accepted in return for potential profits from the business.