Risk appetite - part 1

In this lesson

1. 0:00 Understanding risk attitudes in decision making
2. 0:36 Risk seekers and the Maximax approach
3. 2:09 Risk averse strategies and maximin method
4. 3:16 Minimax regret and regret minimisation
5. 3:59 Risk neutral decisions using expected values

About this lesson

This is essential for P3 Risk Management and strategic decision-making scenarios where you need to justify why a particular course of action aligns with an organisation's risk profile rather than pure numerical analysis. The video breaks down risk seekers as optimistic decision-makers pursuing maximum returns despite high downside risk, using a Maximin approach. Risk-averse organisations take the opposite stance, either seeking the best worst-case outcome (pessimistic maximin thinking) or avoiding decisions they'll regret later (minimax regret). Risk-neutral decisions, by contrast, rely on expected values regardless of potential extremes. Understanding these distinctions helps you analyse case study scenarios and recommend strategies that match stakeholder attitudes, not just financial theory.

Duration: 4m