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Indestata > Debt > Good Risk Vs. Bad Risk
Debt

Good Risk Vs. Bad Risk

TSP Staff By TSP Staff Last updated: January 15, 2025 2 Min Read
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All risk, whether good or bad, shares one thing in common – both require an investment. That investment typically includes time and money.

Good Risk vs. Bad Risk

  • Measurable/Quantifiable – Good Risk is risk that can be measured and quantified by doing Due Diligence (Homework). If the cost of potential outcomes is not measured/quantified, measurable/quantifiable, then you are taking a Bad Risk.
  • Identify Uncertainties – When you are able to identify all of the potential outcomes, whether good or bad, and you are able to plan for all potential outcomes, then you are taking a good risk. When Uncertainties are unknown or unknowable, that’s Bad Risk.
  • Probability of Success – If there is a high probability of success, then you are taking a Good Risk. If the probability of success is low or unknown, then you are taking a Bad Risk.
  • Fundable – Risk that can be adequately funded, under the worst case scenarios, is Good Risk. If under the worst-case scenarios you run out of capital, then that is a Bad Risk.
  • Probability of Failure – If there is a low probability of failure, then you are taking a Good Risk. If there is a high probability of failure, you are taking a Bad Risk.
  • Comprehensible – If you can understand the nature of the risk you are taking, then that is Good Risk. If you cannot understand the nature of that risk, then you are taking a bad Risk.

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