Hello friends Summarized! This time we will discuss how to deal with speculative risk, which is often faced by investors and business people. Speculative risk is one of the factors that must be considered before deciding to invest or do business in a field. Speculative risk can affect the rate of return and the value of our investment or business.
How to Deal with Speculative Risk, and What Is It?
Speculative risk is the risk that arises due to uncertainty in making investment or business decisions. Speculative risk can give positive or negative results, depending on market conditions and the strategy used. Speculative risk is different from pure risk, which can only cause losses and there is no chance of profit.
Definition of Speculative Risk
According to Warsidi (2009), speculative risk is a risk which, if taken, may result in obtaining a profit or incurring a loss. Speculative risk is taken as a conscious choice and not simply the result of an uncontrolled situation. Speculative risk is the opposite of pure risk.
Pure risk or pure risk is a risk that cannot be controlled, which if the risk occurs, it will be able to cause losses for the parties concerned. On the other hand, if it doesn’t happen, it won’t cause a loss. In it there is no opportunity to get the slightest profit.
Examples of pure risk are natural disasters, fire, theft, accidents, death, and so on. Examples of speculative risk are investing in stocks, forex, property, new businesses, and so on.
Types of Speculative Risk
Speculative risk can be divided into three types, namely:
- Market risk , which is the risk caused by changes in price or market value of an asset or investment or business instrument.
- Credit risk , namely the risk caused by the inability of other parties to fulfill their obligations or debts to us.
- Operational risk , which is the risk caused by our inability to carry out investment or business activities effectively and efficiently.
How to Overcome Speculative Risk
Speculative risk cannot be completely avoided, but it can be minimized or managed properly. The following are some ways to deal with speculative risk:
- Identify speculative risks that may occur in our investments or business, and their likelihood and impact.
- Evaluate identified speculative risks , using methods such as SWOT analysis, risk matrices, or others.
- Determine the speculative risk management strategy , namely whether we will avoid, accept, reduce or transfer the speculative risk.
- Implement speculative risk management strategies , namely by taking actions in accordance with predetermined strategies, such as portfolio diversification, insurance, hedging, outsourcing, or others.
- Monitor and re-evaluate speculative risk , namely by measuring the performance and results of our investments or business, and making adjustments if necessary.
Sample case
The following are some examples of speculative risk cases that may occur in the investment and business world:
- An investor buys shares of company X with the hope that the share price will rise in the future. However, it turns out that company X’s stock price dropped dramatically due to a corruption scandal involving the company’s board of directors. This is an example of market risk.
- A businessman gives loans to his business partners in the hope of getting the interest and principal of the loan back according to the agreement. However, it turned out that his business partner went bankrupt and could not repay the loan. This is an example of credit risk.
- An entrepreneur opens a new business in the culinary field with the hope of getting lots of customers and profits. However, it turned out that his business did not run smoothly due to problems in management, product quality, service, competition, and so on. This is an example of operational risk.
Conclusion
Speculative risk is the risk that arises due to uncertainty in making investment or business decisions. Speculative risk can give positive or negative results, depending on market conditions and the strategy used. Speculative risk is different from pure risk, which can only cause losses and there is no chance of profit.
Speculative risk can be divided into three types, namely market risk, credit risk and operational risk. Speculative risk cannot be completely avoided, but it can be minimized or managed properly. The way to deal with speculative risk is to identify, evaluate, determine handling strategies, implement handling strategies, and monitor and re-evaluate these speculative risks.
Thus the article about speculative risk that we present to friends. Summarized. Hopefully useful and add to our insights about the world of investment and business. If you have questions or feedback regarding this article, please write them in the comments column below. Thank you and see you in the next article!
