ACCA SBL Syllabus D. Risk - Related and correlated risks - Notes 8 / 9
Related and correlated
Related risks
These are risks that vary because of the presence of another risk.
This means they do not exist independently and they are likely to rise and fall in importance along with the related one.
Risk correlation is a particular example of related risk.
Positively Correlated
Risks are positively correlated if one will fall with the reduction of the other and increase with the rise of the other.
Negatively correlated
They would be negatively correlated if one rose as the other fell.
Example
Often environmental and reputation risks are positively correlated - the more attention spent on how the business interacts with the environment means their environmental risk is lower and also their reputation risk
