Cost Risk
From Open Risk Manual
Definition
Cost Risk is the risk that product origination costs for achieving a planned amount of business will materially deviate from the expected amounts due to external or internal factors.
Causes
Cost risk can be both due to both internal and external factors:
- External factors comprise primarily of the market and competitive landscape
- Internal factors include the ability to control variable costs without demotivating or losing staff. The cost metric will be primarily referencing variable staff costs but possibly also other production related expenditure
