Why Is It Important to Evaluate Both the Probability and Likely

question 22

Essay

Why is it important to evaluate both the probability and likely severity of loss when evaluating risk? Provide an example to illustrate your answer.

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Definitions:

Capital Goods

Are tangible assets such as buildings, machinery, equipment, vehicles, and tools that an organization uses to produce goods or services.

Production Possibilities Curve

A graphical representation that shows the maximum quantity of one good that can be produced for every possible quantity of another good produced, given the available resources and technology.

Consumer Goods

Products and services that are purchased for personal use or consumption by the general public.

Capital Goods

Goods that are used in producing other goods and services rather than being bought by consumers.