Question

How do our personal risk profiles affect us and society? How does a personal and/or business risk profile benefit or harm society? You may use your own profile, a fictitious example, or a news/media story etc.

Answer 1

How do our personal risk profiles affect us and society?

It must be established that with extra risk comes extra return. However, while operating on such high risk the daily VaR rises tremendously which could have a negative impact on both the individual and the economy of a country. Example: Mr A has borrowed 5 million dollars from a bank. He would be able to repay the loan only if his start-up of a food truck picks up. This exposes both Mr. A, the bank and the economy at risk.

How does a personal and/or business risk profile benefit or harm society?

A personal risk profile can both benefit and harm society in the following manner:

Benefit

1. Better living standards.

2. Enhancement of the per capita income

3. increase in the GDP of the country.

Harmful effects

1.. High daily VaR because of which the financial system would be running huge risk

2. A high amount of stress and problems like depression.