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1. Risks and Uncertainty: Definition Risk is a situation of perfect knowledge where all possible outcomes are known for a given management decision and the probability associated with each possible outcome is also known. Risk is measurable thereby insurable. Uncertainty refers to those situations of imperfect knowledge that exist when: ( i) all possible outcomes are unknown; ( ii) the probability of the outcomes is unknown; and ( iii) both outcomes and the probabilities are unknown. Uncertainty cannot be measured thereby cannot be insured . Risks are measured through probability concepts. 1

2. Examples for risk and uncertainty: 2 Particular Risk Uncertainty Knowledge Perfect knowledge Imperfect knowledge Outcome Known Not known Probability Known Not known Measurement Measurable Not measurable Insurance Insurable Not insurable Example Incidence of pest and diseases (negative) Shortfall in rainfall (negative) Fixed c apital investments (positive) Monsoon failure / drought (negative) Implications of Chinese Corona Virus (COVID- 19) pandemic Outbreak of Avian flu  Technology uncertainty

3. EXTERNALITY AND TRADEOFF An externality is a cost or benefit that is caused by one party but financially incurred or received by another. Externalities can be negative or positive. A negative externality is the indirect imposition of a cost by one party onto another. A positive externality, on the other hand, is when one party receives an indirect benefit as a result of actions taken by another. Externalities can stem from either the production or  consumption  of a good or service. The costs and benefits can be both private—to an individual or an organization—or social, meaning it can affect society as a whole. 3

4. KEY TAKEAWAYS An externality is an event that occurs as a byproduct of another event occurring. An externality can be good or bad, often noted as a positive externality or negative externality. An externality can also be generated when something is made (a production externality) or used (a consumption externality). Pollution caused by commuting to work or a chemical spill caused by improperly stored waste are examples of externalities. Governments and companies can rectify externalities by financial and social measures. 4

5. TRADE OFF A trade-off in economics is when a person or society chooses one thing over another, giving up something in exchange for something else. Trade-offs are a fundamental concept in economics, where people and societies make choices about how to use scarce resources like money, time, and natural resources.  Here are some examples of trade-offs:  Buying a car Large cars can carry more people and may be safer in an accident, but they are heavier and less fuel-efficient than smaller cars. Small cars are more fuel-efficient, but they are smaller and lighter, so they have smaller crumple zones and occupants are less protected in an accident. 5