Difference between revisions of "Volume Risk"
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== Definition == | == Definition == | ||
| + | '''Volume Risk''' is the risk that product or service origination (sales) volumes will materially deviate from the planned / budgeted / expected amounts due to external or internal factors. | ||
| − | + | The volume metric may be referencing the number of transactions, the total size of transactions etc. Volume risk is one of the core components of [[Business Risk]] (Revenue Risk), the another being [[Price Risk]] (or margin risk). | |
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| − | Volume risk is one of the core components of [[Business Risk]] (Revenue Risk), the another being [[Price Risk]] (or margin risk). | ||
== Causes == | == Causes == | ||
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* Internal factors include the ability of the business line to execute the business plan (human capital, infrastructure) | * Internal factors include the ability of the business line to execute the business plan (human capital, infrastructure) | ||
* External factors comprise primarily of the competitive landscape | * External factors comprise primarily of the competitive landscape | ||
| + | |||
When considering the competitive landscape it is useful to separate the overall market volume growth / decline as a separate risk factor from the firm's market share | When considering the competitive landscape it is useful to separate the overall market volume growth / decline as a separate risk factor from the firm's market share | ||
== Issues and Challenges == | == Issues and Challenges == | ||
| − | + | * Formal modelling of business risk (and its components) is in a rather nascent stage. | |
| − | Formal modelling of business risk (and its components) is in a rather nascent stage. | + | * It is not one of the recognized regulatory risk types that attract capital requirements. |
| − | It is not one of the recognized regulatory risk types that attract capital requirements. | ||
[[Category:Business Risk]] | [[Category:Business Risk]] | ||
[[Category:Risk Elements]] | [[Category:Risk Elements]] | ||
Latest revision as of 11:58, 27 September 2021
Definition
Volume Risk is the risk that product or service origination (sales) volumes will materially deviate from the planned / budgeted / expected amounts due to external or internal factors.
The volume metric may be referencing the number of transactions, the total size of transactions etc. Volume risk is one of the core components of Business Risk (Revenue Risk), the another being Price Risk (or margin risk).
Causes
Volume risk can be both due to internal and external factors.
- Internal factors include the ability of the business line to execute the business plan (human capital, infrastructure)
- External factors comprise primarily of the competitive landscape
When considering the competitive landscape it is useful to separate the overall market volume growth / decline as a separate risk factor from the firm's market share
Issues and Challenges
- Formal modelling of business risk (and its components) is in a rather nascent stage.
- It is not one of the recognized regulatory risk types that attract capital requirements.
