Risk
Probability of negative outcome with quantifiable consequences.
Formula
Expected Value = Probability of Outcome × Financial Impact
Real World
Boeing faced massive financial and reputational risk after the 737 MAX crisis in 2019, grounding its entire fleet and costing over $20 billion — a strategic risk that became catastrophic reality.
Exam Focus
Distinguish risk (quantifiable, measurable probability) from uncertainty (unquantifiable) — examiners reward this distinction in higher-mark responses.
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