What Strategies Can Businesses Use to Manage the Risk-Return Tradeoff?
Businesses can employ several strategies to manage the risk-return tradeoff effectively:
1. Diversification: Spreading investments across different assets or sectors can mitigate risk. 2. Hedging: Using financial instruments like options and futures to protect against adverse price movements. 3. Research and Development: Investing in R&D can lead to innovative products with high returns, though it carries significant risk. 4. Strategic Alliances: Forming partnerships can share the risk and provide mutual benefits.