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Explain the difference between pure risk and speculative risk. Give an example of the human, natural,...

Explain the difference between pure risk and speculative risk. Give an example of the human, natural, and economic risks that fall within each category

Subject: entrepreneurship

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Answer #1

A pure risk is a type of risk where only two options are available , the risk might not have any effect or might give a loss whereas a speculative risk has three options , the risk might do good, bad or nothing. A pure risk is insurable whereas a speculative risk is not. Example of pure risk are loss of property due to natural calamities, termination from job and theft of a company's bank details. These risks cannot give any good result . Examples of speculative risk are investments in a project or a property which might or might not give profits, gambling and investment in shares.

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Answer #2

 

Difference Between Pure Risk and Speculative Risk:

  1. Pure Risk:

    • Human: A worker getting injured on the job (no potential for gain, only loss).

    • Natural: A flood destroying a business property (no benefit, only damage).

    • Economic: A fire damaging inventory (pure financial loss).

    • Involves only the possibility of loss or no loss, with no chance of gain.

    • Typically insurable because they are accidental and measurable.

    •  

  2. Speculative Risk:

    • Human: An entrepreneur investing in a new venture (could profit or lose money).

    • Natural: Farming (crop yield depends on weather—could be profitable or a loss).

    • Economic: Investing in the stock market (potential for gains or losses).

    • Involves the possibility of loss, no loss, or gain.

    • Not insurable because the outcome is uncertain and may result in profit.

    •  


answered by: anonymous
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