Final answer:
Risk Management involves a cost/benefit analysis where management assesses whether the costs of safeguards are justified by the benefits. Marginal Analysis and Present Discounted Value are tools used to compare costs and benefits over time, ensuring efficient allocation of resources and decision-making in business and government settings.
Step-by-step explanation:
The phrase you are looking for is Risk Management, which is the valuation by management of the cost/benefit analysis of possible safeguards and the determination that the cost of the countermeasure greatly outweighs the possible cost of loss due to a risk. This concept is an integral part of the decision-making process within a business or organization. By performing a cost/benefit analysis, management can determine whether the additional protection from a specific threat or risk is worth the associated costs.
Understanding Risk Management
When it comes to risk management, one method to assess potential threats is by using the Marginal Cost/Benefit Analysis. This involves comparing the extra costs versus the extra benefits of implementing a safety measure or safeguard. The decision to go ahead with a safeguard is justified if the marginal benefits exceed the marginal costs. This approach is useful in a variety of settings including environmental policies, business investments, and government proposals.
In the case of environmental cleanup, if the marginal costs of cleanup are greater than the marginal benefit, resources could be more efficiently allocated elsewhere in the economy. This is known as Marginal Analysis, another important concept in risk management. It helps to quantify the efficiency of investments in terms of resource allocation within society.
Additionally, the concept of Present Discounted Value is frequently utilized to compare the present costs of an investment against the future benefits that will be derived from it. This analysis extends beyond finance and is regularly employed by businesses considering physical capital investments or by governments weighing the costs and benefits of adding safety features to infrastructure.