Why has Communism failed everywhere ? A chance for commies to explain

[Kontiki]

Originally posted by Flubber


Kontiki

he can't-- the idea that there is a number on the analysis called risk cost is laughable. (unless he wants to go back to his previous use of the term referring to insurance premiums as a cost item)

Risk is generally simple (if hard to quantify). You assess the probability of various outcomes and the results are quantified. management usually wants to know the p50-- most likely return, the bounds of likely outcomes say p99 and p01 and the risk weighted rate of return. all of this goes into the decision making process and can result in a project with a higher likely rate of return being rejected in favor of a lower return with less downside risk

Oh, I know all that - I have an MBA and work in the financial sector on project work. But apparently we don't assess risk like "normal" people.

[Flubber]

Originally posted by Kidicious


Why do you guys make things so difficult. You can't not insure your factories and not take into consideration that eventually some factories will burn down. If you make $20M profit because you didn't buy insurance and instead took a risk sure you have made profit, but if you keep doing that eventually you will pay the price.

Are you still talking about insurance

If you buy it its a cost.

If you don't, any uninsured risk goes into the probable outcomes.


For bigger companies with hundreds of facilities it is obvious that not buying insurance will pay off in the long run on any typical claims experience over the years. But most companies insure for the catastrophe-- often with huge limits.

Governments do the same. They know that on average they will lose say 10 million on small disasters under a million each. the insurance companies know this too so the premium for that risk would be over 10 million (insurance company needs a profit plus a premium for the risk of the losses being much higher than average)


Finally -- for these big companies, existing coverages cover NEW operations-- so there is no additional cost for insurance on a new project

[Kidlicious]

Originally posted by Flubber


Kontiki

he can't-- the idea that there is a number on the analysis called risk cost is laughable.

That depends. Risk can be calculated. That's a prediction which won't be accurate, and won't have the same outcome, but you can calculate a risk cost. They do it all the time in the insurance industry.

[Kontiki]

Before we get into talking about the insurance industry, would you like to formally acknowledge that your equation is non-sensical?

[Flubber]

Originally posted by Kontiki


Oh, I know all that - I have an MBA and work in the financial sector on project work. But apparently we don't assess risk like "normal" people.

I didn't know you had that experience. I'm working as legal counsel for a proposed 1.2 billion dollar project and most of the meetings and agreements we are doing are all about reducing risk-- But I guess the way international conglomerates do things , isn't normal.


Hell I am holding a risk assessment as we speak. Its only for a well though

[Kidlicious]

Originally posted by Kontiki


I don't see how we're making this difficult - in fact, we're making it as simple as possible.

But even going with what you've said above, why don't you tell us what the risk cost is and why you will eventually pay the price? Do all factories eventually burn down at some point or another?

You built the equation, make it work!

risk cost = roughly the probability of loss times the potental loss. It's the actual loses that reduce profit, but you can't look at an income statement and see risk cost. However, there is always the cost of taking risks. If you don't take loses then there will be no costs.

[Kidlicious]

Originally posted by Kontiki


No, the loss is reduced revenue, not an independent cost of risk.

So you lost money on your investment. I hope for your sake that you considered the costs of making that investment before you started counting your return.

[Kidlicious]

Originally posted by Kontiki
Before we get into talking about the insurance industry, would you like to formally acknowledge that your equation is non-sensical?

You don't understand it obviously, which doesn't suprise me for the simple fact that I already have experience with you.

[Flubber]

Keep at him kontiki.

IN another page or so he will be saying exactly what I was saying 4-5 pages ago. At that time he will lecture you on your stupidity for not acknowledging something obvious , usually something that you have stated repeatedly or something which a 7th grader would know.

What will happen is he will adopt a risk assessment methodology the same as we are talking about and claim that is what "risk cost" meant all along


@ kid-- already its very different that when you said "risk cost" meant insurance premiums and even cited an article and questioned my literacy

[Kontiki]

Originally posted by Kidicious


risk cost = roughly the probability of loss times the potental loss. It's the actual loses that reduce profit, but you can't look at an income statement and see risk cost. However, there is always the cost of taking risks. If you don't take loses then there will be no costs.

That's nice. Put it into your equation and explain how you can "double dip" with a loss in revenue and have a seperate risk cost.

[Kontiki]

Originally posted by Kidicious


You don't understand it obviously, which doesn't suprise me for the simple fact that I already have experience with you.

I guess I don't, and you offered to explain it, so show me a working example.

[Kidlicious]

Here you go Kontiki. Say you plan to build 4 factories. You calculate the risk of fire to any one factory to be .25 so that means you can expect that one factory will burn. Before you build the factories you calculate the loss of one factory into your profit forcasts. But no factories burn. So the loss was not realized but there always was a risk cost.

[Kontiki]

Originally posted by Kidicious


So you lost money on your investment. I hope for your sake that you considered the costs of making that investment before you started counting your return.

Why wouldn't I? That has nothing to do with whether or not there is a risk cost. I don't lose money in the form a risk cost on top of my investment.

[Kidlicious]

Originally posted by Kontiki


That's nice. Put it into your equation and explain how you can "double dip" with a loss in revenue and have a seperate risk cost.

If you want to predict revenue without considering the risk of loss feel free Kontiki. The actual revenue will not have a risk cost. It will have losses, or maybe not. That doesn't mean that there was never a risk cost.

[Kidlicious]

Originally posted by Kontiki


Why wouldn't I? That has nothing to do with whether or not there is a risk cost. I don't lose money in the form a risk cost on top of my investment.

If you lose that loss is the cost of taking a risk. Try not to respond to that without addressing it at all like you usually do.