what is value of risk vor 
value of risk vor is the financial benefit that a risk taking activity will bring to the stakeholders of an organization it requires the organization to determine whether an activity will help to move it closer to completing its objectives understanding value of risk vor in financial theory corporations don t have any risk preferences but their stakeholders do the goal is generally to make money without being reckless company management knows that if they put the resources available to good use they stand a decent chance of keeping their jobs and boosting the wealth of investors sitting idly means missing out on opportunities or as some are keen to point out taking profits and setting fire to them the problem is that gain seldom comes without an element of pain every decision is accompanied by risk and therefore needs to be scrutinized carefully before pursuing all activities that a company may undertake from entering a new market to developing a new product carry risk how much depends on the type of activity and the likelihood that the company will not be able to recoup costs at the same time there s also the recognition that spending money on one endeavor carries with it an opportunity cost the potential benefits a business misses out on when choosing one alternative over another value of risk vor methodvalue of risk vor requires a company to examine the various components of the cost of risk they include the actual costs for losses incurred the cost of bonds insurance or reinsurance to fund losses the costs of mitigating the risks that could cause the company to experience a loss and the cost of administering a risk management and loss mitigation program value of risk vor treats each component of the cost of risk as an investment option just as with a stock or a bond the components must show a return on investment roi examples of value of risk vor a company that starts a risk management department is incurring a substantial personnel expense the department is expected to shrink the company s loss exposure by managing insurance and reinsurance portfolios identifying potential threats and developing methods for reducing risk exposure 