Which type of risk has the chance of loss or gain?

Speculative risk is characterized by the potential for both loss and gain, distinguishing it from pure risk, which involves only the possibility of loss without any opportunity for a gain. In the context of risk management, speculative risks are typically associated with investments, businesses, and entrepreneurial ventures, where outcomes may lead to profit or loss based on various factors, including market conditions or operational performance.

Understanding speculative risk is crucial for risk managers since it allows them to evaluate opportunities as well as potential threats. It requires careful analysis and strategy to navigate and manage the uncertainty inherent in situations that may yield varying financial outcomes.

In contrast, pure risk focuses solely on the presence of loss without the potential for gain. Inherent risk refers to the natural level of risk that exists in any given situation or activity before any controls are applied. Operational risk encompasses risks arising from internal processes, people, and systems, specifically within an organization. While all these other types of risks are important to understand, they do not encompass the dual nature of loss and gain that defines speculative risk.