What type of risk involves a possibility of financial gain?

Speculative risk refers to situations where there is a chance of both gain and loss, making it distinct from pure risk, which only involves the possibility of loss with no potential for profit. In a speculative risk scenario, individuals or entities might invest in avenues like stocks or entrepreneurial ventures, where fluctuating outcomes could lead to financial benefit or a loss of capital. For example, gambling, investing in real estate, or starting a business can all yield positive returns, but they also carry the associated risk of losing the initial investment.

In this context, the correct identification of speculative risk underscores the understanding that financial decisions often carry both possibilities. This contrasts with pure risk, where outcomes are only negative, such as facing potential harm or loss from natural disasters or accidents. The other types, such as inherent and controllable risk, refer more to the nature of risks within businesses or operations rather than the potential for financial gain or loss, which is the central theme of speculative risk.