Question

In order to evaluate risk, management may also set qualitative risk classes. Rank these four projects from least risky to most risky, all other things being equal. Completely new market in United States. Completely new market in South America. Addition to normal product line. Repair to old machinery.

Answer 1

Answer:

Ranking projects from least risky to most risky:

1. Repair to old machinery.

2. Addition to normal product line.

3. Completely new market in United States.

4. Completely new market in South America.

Explanation:

As can be seen from the above scenario, the risk profile increases as the company's activities move away from the known, controllable, and internal arenas to the unknown, uncontrollable, and external arenas.  This implies that increasing uncertainty induces more risk.