What Is a Risk Factor?
Risk factors are factors that cannot be controlled in advance. The decision of the investment scheme depends on the calculation of the selection criteria, and a considerable part of the data is subjectively estimated. In this way, it will appear that the result of the calculation is not consistent with the objective reality that will occur in the future. This is because the evolution of things is not something that decision-makers can master or counter-intuitive. An investment action often results in multiple outcomes. For this reason, decision makers who choose any one of these options will bear certain risks. Such risks exist because of factors beyond the control of decision makers. For example, changes in human psychology and nature. [1]
Risk factor
Right!- Chinese name
- Risk factor
- Explanation
- Increase the frequency of risk accidents
- Factor
- Tangible and intangible risk factors.
- Field
- the term
- Risk factors are factors that cannot be controlled in advance. The decision of the investment scheme depends on the calculation of the selection criteria, and a considerable part of the data is subjectively estimated. In this way, it will appear that the result of the calculation is not consistent with the objective reality that will occur in the future. This is because the evolution of things is not something that decision-makers can master or counter-intuitive. An investment action often results in multiple outcomes. For this reason, decision makers who choose any one of these options will bear certain risks. Such risks exist because of factors beyond the control of decision makers. For example, changes in human psychology and nature. [1]
- There are two types of risk factors that affect the probability and degree of loss: tangible risk factors and intangible risk factors.
- I. Tangible risk factors
- The tangible risk factors are the material factors that cause the loss to occur. For example, the area where the property is located, the building structure and the purpose. The southern region is more likely to have a flood than the northern region; houses with wooden structures are more likely to have fires than houses with concrete structures; motor vehicles are more likely to be involved in traffic than non-operational traffic accidents.
- Intangible risk factors
- Non-material factors such as culture, customs, and attitudes to life also affect the possibility of damage and the extent of damage. Intangible risk factors include moral risk factors and behavioral risk factors. Moral hazard factors refer to factors that deliberately promote the occurrence of risk accidents by dishonesty, bad intentions, or fraud, or expand the losses caused by risk accidents that have occurred. Behavioral risk factors are factors that are prone to cause risk accidents and increase the degree of loss due to carelessness and indifference in people's behavior.