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Strategic Risk Taking: A Framework for Risk Management by Aswath Damodaran

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Chapter 11. Strategic Risk Management

Why would risk-averse individuals and entities ever expose themselves intentionally to risk and increase that exposure over time? One reason is that they believe they can exploit these risks to advantage and generate value. How else can we explain why companies embark into emerging markets that have substantial political and economic risk or into technologies where the ground rules change on a day-to-day basis? By the same token, the most successful companies in every sector and in each generation—General Motors in the 1920s, IBM in the 1950s and 1960s, Microsoft and Intel in the 1980s and 1990s, and Google in this decade—share a common characteristic. They achieved their success not by avoiding risk but ...

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