Risk

Risk is a measure of the extent to which an entity is threatened by a potential circumstance or event. It is a function of the adverse impacts which occurs, when the given circumstance or event occurs and the likelihood of its occurrence.

Risks can be divided into two groups, namely:

1. Non-systematic risk, namely the risk that can be eliminated or reduced through a diversification or risk prevention and mitigation measures.
2. Systematic risk, risks that cannot be eliminated or reduced through diversification, usually associated with markets or events that can systematically affect market position (Iban Sofyan, 2004).

In addition, Kasidy (2010) divides the types of risk into two, namely:

1. Speculative risk: Speculative risk is a situation faced by companies that can provide benefits and can also provide losses. Speculative risk is sometimes known as business risk. Someone who invests funds in a place facing two possibilities. The first possibility is that the investment is profitable or even the investment is detrimental. The risks faced like this are speculative risks.
2. Pure risk: Pure risk is something that can only cause harm or nothing happens and may not be profitable. One example is a fire, if the company suffers a fire, the company will suffer losses. Another possibility is that there is no fire. Thus, fires only cause losses, not cause profits unless there is intent to burn with certain intentions. Pure risk is something that can only cause harm or nothing happens and may not be profitable. One way to avoid pure risk is insurance. Thus the amount of loss can be minimized. That's why pure risk is sometimes known as insurable risk.

The main difference between speculative risk and pure risk is the possibility of profit or not, for speculative risk there is still the possibility of profit while for pure risk there is no possibility of profit. Actual events sometimes deviate from estimates. This means that there is a possibility of beneficial or adverse irregularities. If both possibilities exist, then the risk is speculative. On the contrary, the opposite of speculative risk is pure risk, that is, there is only the possibility of loss and has no possibility of profit. The risk manager's main task is to handle pure risk and not deal with speculative risks, unless speculative risks force him to face these pure risks. Determining the source of risk is important because it affects how to handle it. Risk sources can be classified as social risk, physical risk and economic risk. Costs incurred due to risk or uncertainty can be divided as follows:

• Costs of unexpected losses
• Costs of uncertainty itself