1

Module 3
Subject Name : Management
Paper Name : Managerial Economics
Module Title : Elements of Decision Theory and Decision Analysis
Module ID : Module No. 3
Pre-requisite : Basic Knowledge of Quantitative Techniques
Objectives : To understand the basic elements of decision taking and various
decision criteria for selecting the optimal course of action
Key words : Acts, Events, Pay-off Matrix, Regret Matrix, EMV, EOL, EVPI,
Decision Tree.
Written by : Dr. S.C. Aggarwal, Former Director Shree Atmanand Jain
Institute of Managment and Techology, Ambala City
Learning Outcomes :
After having studied this module, the readers will be able :
 To know decision making criteria under uncertainties
 To know decision making criteria under risk
 To understand decision tree technique of decision taking.

Quadrant I
Elements of Decision Taking and Decision Analysis
 Introduction :
The basic task of manager is to take decision in business. The manager has certain
information on the basis of which decisions are to be taken. A decision is defined as
selection from two or more courses of action. The manager is uncertain about the actual
consequences that will occur for each course of action being considered. The study of
decision theory helps the decision maker (manager) to choose an optimal course of action
among several alternatives where the outcome or consequences associated with an action
is uncertain. Decision theory is concerned with the techniques for making decisions
especially under condition of uncertainty and risk.

 Elements of Decision Taking

Before we discuss techniques (criteria) of decision making, it is necessary to define the
following basic elements used in its study.
(1) Acts : A decision always involves a selection from two or more alternatives.
These several alternatives are called acts. For example, an investor is faced with the
problem of choosing one alternative out of three alternatives i bonds, stocks and mutual
funds for investment. It means there are three acts out of which one act is to be chosen.
Acts are generally denoted by A1, A2, A3 ..... An.
(2) States of Nature (or Events) : In every act, there are events or states of nature
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which are uncertain and beyond the control of the decision maker. In the above example,
where the investor is faced with the problem of choosing one of the three alternatives for
investment, the states of nature (or called the potential demand) for the product may be
good, moderate or poor. The potential demand are called events or states of nature which
are uncertain. The state of nature or events are denoted by S1, S2, S3 ..... S4.
(3) Pay-off Table (or Pay-offs Matrix) : Pay off is the gain or losses received
by the decision maker from a given combination of course of action and event (or state
of nature). Pay off is also known as outcome, consequence, gains or losses. A pay off
table (or pay off matrix) consists of alternative course of action like A1, A2, A3 ..... An
and various states of nature (or events) like S1, S2, S3 ....... Sn involved in every act.
The specimen of a pay off table or pay off matrix is shown below :
Acts
States of Nature A1 A2 A3
S1 p11 p12 p13
S2 p21 p22 p23
S3 p31 p32 p33

In the above table, column represents acts, row represents events (or states of nature)
and p11, p12, ..... p33 are the pay off for a given combination of act and event.
(4) Opportunity Loss Table (or Regret Matrix) : Opportunity loss is the loss
incurred due to failure of not choosing the best possible course of action. It is the difference
between the highest possible pay off for a state of nature and the actual pay off obtained
for a particular action taken. In terms of formula.
Opportunity Loss or Regret for any act = Highest possible pay off for a state of nature
– pay off of that course of action.
An opportunity loss table (or regret matrix) gives the opportunity loss values or
regret for each combination of a course of action and state of nature.
A specimen of the opportunity loss table (or regret table) is shown below :
Opportunity loss (or Regret) Table
Acts
States of Nature A1 A2 A3
S1 M1 – p11 M1 – p12 M1 – p13
S2 M2 – p21 M2 – p22 M2 – p23
S3 M3 – p31 M3– p31 M3 – p33

where Mi (i = 1, 2, 3) = Maximum profit for each state of nature

pij = actual pay off of each act.
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 Decision Making Criteria

Decision Making are being classified in the following three categories:
(1) Decision Making under Certainity : In this environment only one state of
nature exists. For each alternative there is one and only one value of the pay-off. Suppose
an investor wish to invest Rs, 1,00,000 for 5 years period. The alternatives is to open a
saving bank account in a bank giving 7.5% interest and the other alternative is to invest
in PPF pay, at 8.5% interest. Since both investments are secured, then PPF will be the
better option. It is easy to take decision under conditions of certainity.
(2) Decision Making under Uncertainity : Here more than one state of nature
exist but the decision maker is not sure what event or state of natue will take place and
he also lack sufficient knowledge to assign probability to various states of nature
(3) Decision Making under Risk : Here also, more than one state of nature or
event exist but the decision maker has sufficient knowledge to assign probabilities to
various states of nature.
 Decision Making under Uncertainity
A decision process is said to be under the condition of uncertainity when the
probabilities associated with the occurence of different events or states of nature are not
known to the decision-maker. For decision making under uncertainity, the following
different decision criteira are usually adopted :
(1) Maximax Criterion
(2) Maximin Criterion
(3) Minimax Regret Criterion
(4) Laplace Criteria
(5) Hurwictz Criterian
(1) Maximax Criterion : This criterion is based on extreme optimism. Under
this crieterion, the decision maker find the maximum pay-offs for each act and then select
the act that represents maximum of the maxima. In decision problem dealing with costs,
the minimum for each act is considered and then the act that minimise the above minimum
costs is selected. Thus the criterion used is minimin.
(2)Maximin Criterion : This criterion is based on extreme pessimism. It is also
called Wald criterion named after Abraham Wald. Under this criteria the decision maker
find the minimum pay off for each act and then select the act for which the minimum
pay off is highest. In decision problem dealing with costs, maximum cost associated with
each act is considered and that the act that minimises the maximum costs is chosen. Thus,
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the criteria used is the minimax crieterion.

(3) Minimum Regret Crietrion : This criterion was given by Leonard Savage
and it is therefore called Savage criteria. This crieteria uses opportunity losses or regret
matrix. Under this criterion, the pay off matrix is converted into opportunity losses (or
regret) matrix. Thereafter, the decision maker find the maximum regret for each act and
then selects the act for which maximum regret is minimum.
(4) Hurwicz Criterion : This criterion is the mixture of maximax and maximin
criteria and that is why it is called criterion of realism. This criterion was given by Leonard
Hurwicz and therefore called Hurwicz Criterion. In this criteria, it is assumed that decision
maker possesses a specified degree of optimism represented by coefficient of optimism
(α) 0 < α < 1 (α < 1) and coefficient of pessimism is obtained by subtracting α from 1
i.e. (1 - α) is the coefficient of pessismism. Under this crieterion, the decision maker
find the maximum and minimum pay off for each act and estimate the coefficient of
optimism denoted by α and coefficient of pessimism denoted by 1 - α. The expected value
for each act is obtained by using the following formula.
Expected Value (Ai) = α × maximum pay off + (1 - α) minimum pay off
The decision maker select the act which has maximum expected value. The act
selected is called optimal act.
(5) Laplace Criterion : This crieterion is based on the concept of equal likehood
which means that the probabilities of different states of nature for a given act are all equal.
This criteria was given by Semonde Laplace and therfore called Laplace Criterion. Under
this criterian the decision maker determines the average pay off by using the formula :
1
Expected Value (Ai) = (x + x2 + ...... xn) where i = 1, 2, 3 .....
n 1
where EV (Ai) = Expected Value for act Ai.
n the number of states of nature or events.
x1, x2 ..... xn are pay offs of each act corresponding to different states of nature.
The decision maker select that act which has largest expected value. The act
selected is called optimal act.
Note : If the number of states of nature are 4, the probability of each state of
nature is 1/4. Thus, the probability depends upon the number of states of nature.
The following example illustrate the above decision crieteria.
Example 1 : Suppose that a decision maker faced with three decision alternatives
and four states of nature constructs the following pay off table :
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Pay off Table (Rs. ‘000)

Acts
States of Nature A1 A2 A3 A4
S1 5 10 18 25
S2 8 7 8 23
S3 21 18 12 21
S4 30 22 19 20

Determine the alternative (or act) to be chosen under :

(i) Maximax Criterion (ii) Maximin Criterion (iii) Minimax Regret Criterion (iv) Hurwicz
Criteron (Assuming α = 0.8) and (v) Laplace Criterion
Solution : (i) Maximax Criterion : In this criterion the decision maker selects the
alternative (act) which maximses the maximnum profits
Acts Maximum Pay offs
A1 30 - Maximax
A2 22
1
A3 19
x
A4 25
Thus, A1 is the optimal act
(ii) Maximin Criterion : In this criterion the decision maker selects the alternative
(or act) which maximises the minimum pay off.
Acts Minimum Pay off
A1 5
A2 7
A3 8
A4 20 - Maximin
Thus, A4 is the optimal act.
(iii) Minimax Regret Criterion : In this criterion, the decision maker selects that
alternative which minimises the maximum of the oppotunity loss. To apply this criteria
we construct opportunity loss table.
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Opportunity Loss Table

Acts
States of Nature A1 A2 A3 A4
S1 25 - 5 = 20 25 - 10 =15 25 - 18 = 7 25 - 25 = 0
S2 23 - 8 = 15 23 - 7 = 16 23 - 8 = 15 23 - 23 = 0
S3 21 - 21 = 0 21 - 18 = 3 21 - 12 = 9 21 - 21 = 0
S4 30 - 30 = 0 30 - 22 = 8 30 - 19 = 11 30 - 20 = 10

Acts Maximum Opportunity Loss

A1 20
A2 16
A3 15
A4 10* Minimax Regret
Thus, A4 is the optimal act. It minimises the maximum opportunity losses.
(iv) Hurwicz Criterion : (Given α = 0.8 and 1 – α = 1 – 0.8 = 0.2)
Acts Maximum Pay off Minimum Pay off Expected Value
A1 30 5 30 x 0.8 x 0.2 = 25
A2 22 7 22 x 0.8 + 7 x 0.2 = 19
A3 19 8 19 x 0.8 + 8 x 0.2 = 16.8
A4 25 20 25 x 0.8 + 20 x 0.2 = 24
Thus, according to Hurwicz criterion A1 act is selected because the expected value of A1
act is maximum.
(v) Laplace Criterion : In this criterion we assign equal probability to each state of nature.
Acts
States of Nature Probability A1 A2 A3 A4
S1 1/4 5 10 18 25
S2 1/4 8 7 8 23
S3 1/4 21 18 12 21
S4 1/4 30 22 19 20

Expected Value (A1) = 1/4 [5 + 8 + 21 + 30) = 16

Expected Value (A2) = 1/4 [10 + 7 + 18 + 22) = 14.25
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Expected Value (A3) = 1/4 [18 + 8 + 12 + 19] = 14.25

Expected Value (A4) = 1/4 [25 + 23 + 21 + 20] = 22.25
Thus, the decision maker should select act A4 for which it maximises the expected pay
off.
 Decision Making under Risk
A decision process is said to be under the condition of risk when the probablities
associated with the occurence of different events or states of nature are known to the
decision maker. For decision making under risk the following criteria are usually
adopted :
(1) Expected Monetary Value (EMV) Criterion
(2) Expected Opportunity Loss (EOL) Criterion
(3) Expected Value of Perfect Information (EVPI)
(1) Expected Monetary Value (EMV) Criterion : Under this criterion, the
decision maker maximise the expected monetary value of each act. This criterion requires
the calculation of expected monetary value of each act which is obtained by multiplying
the pay offs for the act by the assigned probabilities of various states of nature. The
decision maker selects the act that yields the highest EMV. Symbolically,
EMV (Ai) = p1x11 + p2x21 + p3X31 + ..... px Xn1
where X11, X21 and X31 .... Xn1 denote pay off of each act for S1, S2, S3 ..... Sn states
of nature and p1, p2, p3 ..... pn denote the probability of occurence of S1, S2, S3 .... Sn states
of nature.
(2) Expected Opportunity Loss (EOL) Criterion : This criterion is an alternative
to EMV criteria. Under this criterion the decision minimises the expected opportunity
losses of each act. The EOL of an act is obtained by multiplying the opportunity loss for
that act by the probabilities assigned to various states of nature. The decision maker selects
the act with minimise EOL. Symbolically,
EOL (Ai ) = p1 L11 + p2L21 + p3 L31 + .... pn Ln1
where L11, L21 = L31 ...... Ln1 denote the opportunity loss of each act for S1, S2 .....
Sn ... states of nature and p1, p2 ..... pn denote the probability of occurence of S1, S2 .......
Sn states of nature.
Note : Decision using EMV and EOL criteria are the same.
(3) Expected Value of Perfect Information (EVPI) : Under this criterion it is
assumed that the decision maker has authentic and perfect information about the future,
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With perfect information the decision maker would know in advance the demand for each
day and will store the exact number as per demand.The expected value of pefect
information (EVPI) is the difference between expected profit under perfect information
(Certainity) and expected pay-off with uncertainity (or EMV of Best Act). Symbolically,
EVPI = EPPI - EMV of Best Act
Where EPPI = (Best pay-off the Ist state of nature x probability of Ist state of
nature) + Best pay off for 2nd state of nature x probability of 2nd state of nature + .....
Best pay off for last state of nature x probability of last state of nature.
The following example illustrates the EMV, EOL and EVPI criteria.
Example : Pay-offs of three acts A, B and C and states of nature S1, S2, S3 are
given below :
Pay off (in Rs.)
Acts
State of Nature A B C
S1 -20 -50 200
S2 200 -100 -50
S3 400 600 300

The probabilities of the states of nature are 0.3, 0.4 and 0.3. Calculate the EMV
and EOL for the data given and select the best act. Also find the expected value of perfect
information (EVPI).
Solution (i) Calculation of EMV
Pay Off Table
Acts
States of Nature Probability A B C
S1 0.3 -20 -50 200
S2 0.4 200 -100 -50
S3 0.3 400 600 300

The expected monetary value (EMV) for the acts A, B and C are calculated below :
EMV (A) = –20 × 0.3 + 200 × 0.4 + 400 × 0.3 = Rs. 194
EMV (B) = –50 × 0.3 + –100 × 0.4 + 600 × 0.3 = Rs. 125
EMV (C) = 200 × 0.3 + –50 × 0-.4 + 300 × 0.3 = Rs. 130
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Since EMV of Act A is highest, Act A can be chosen as the best act.
(ii) Calculation of EOL
For calculating EOL, we first convert the pay-off matrix into opportunity losses
(or regret) matrix
Opportunity Loss (or Regret) Table
Acts
State of Nature A B C
S1 200 - (-20)=-220 20-(-50)=250 200 - 200 = 0
S2 200 - 200 = 0 200 - (-100)=300 200 - (-50)=250
S3 600 - 400=200 600-600=0 600-300=300

The above data is re-written in the form of the following table :

Acts
States of Nature Probability A B C
S1 0.3 220 250 0
S2 0.4 0 300 250
S3 0.3 200 0 300

The expected opportunity losses (EOL) for the acts A, B and C are calculated as :
EOL (A) = 220 x 0.3 + 0 x 0.4 + 0.3 x 200 = Rs. 126
EOL (B) = 250 x 0.3 + 300 x 0.4 + 0 x 0.3 = Rs. 195
EOL (C) = 0 x 0.3 + 250 x 0.4 + 300 x 0.3 = Rs. 190
Since EOl of act A is minimum, Act A can be chosen as best act.
Note : Decision using EMV and EOL criteria are the same
(iii) Calculation of EVPI
To calculate EVPI, first we calculate EPPI
Expected Profit with Perfect Information
Acts
State of Nature Probability A B C Maximum Pay off
S1 0.3 -20 -50 200 200
S2 0.4 200 -100 -50 200
S3 0.3 400 600 300 600
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EPPI = 200 x 0.3 + 200 x 0.4 + 600 x 0.3 = Rs. 320

EVPI = Expected Profit with Perfect Information - Expected Monetary Value
of Best Act under Risk
= EPPI - EMV of Best Act
= 320 - 194 = Rs. 126
Example 3 : A newspaper boy has estimated the following probability of selling a
magazine:
No. of copies sold 10 11 12 13 14
Probability 0.10 0.15 0.20 0.25 0.30
Cost of copy is Rs. 3 and sale price is Rs. 5. He cannot return unsold copies.
How many copies should he order to maximise probability ? Also calculate EVPI.
Solution : It is clear from the given problem that the newspaper to boy would
not purchase less than 10 copies and more than 14 copies. We can calculate the profit
values for each purchase action - event (demand) combination using the formula.
We are given Cost Price = Rs. 3, Selling Price = Rs. 5
Profit on sale = Rs. 5 - Rs. 3 = Rs. 2
Loss on unsold copies = Rs. 3
The conditional pay off (profit) in Rs. is given by :
Pay Off Table
Possible Probability Possible Purchase Action
Demand (D)
(No. of copies) 10 copies 11 copies 12 copies 13 copies 14 copies
10 0.10 20 20 – 3×1=17 20–3×2 =14 20–3×3 = 11 20–3×4 = 8
11 0.15 20 22 22–3×2 =19 22–3×2 =16 22–3×3 =13
12 0.20 20 22 20–3×2 =24 24–3×1=21 24–3×2 =18
13 0.25 20 22 24 26 26–3×1 =23
14 0.30 20 22 24 26 28
Expected Monetary Value (EMV) can now be computed
EMV (10 copies) = 0.10 × 20 + 0.15 × 20 + 0.20 × 20 + 0.25 × 20 + 0.30 × 20
= Rs. 20
EMV (11 copies) = 0.10 × 17 + 0.15 × 22 + 0.20 × 22 + 0.25 × 22 + 0.30 × 22
= Rs 21.50
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EMV (12 copies) = 0.10 × 14 × 0.15 × 19 + 0.20 × 24 + 0.25 × 24 + 0.30 × 24

= Rs. 22.25
EMV (13 copies) = 0.10 × 11 + 0.15 × 16 + 0.20 × 21 + 0.25 × 26 + 0.30 × 26
= Rs. 22
EMV (14 copies) = 0.10 × 8 + 0.15 × 13 + 0.20 × 18 + 0.25 × 23 + 0.30 × 28
= Rs. 20.50
From the above, we see that the highest value of EMV is Rs. 22.50 which corresponds to
the purchase of 12 copies. Hence the newspaper boy must order 12 copies to earn the
highest possible average profit of Rs. 22.25.
Calculation of EVPI
To calculate EVPI, we first calculate EPPI
Maximum Profit with Perfect Information
Possible Demand Probability Possible Purchase Action Max. Pay-off
10 11 12 13 14
10 0.10 20 - - - - 20
11 0.15 - 22 - - - 22
12 0.20 - - 24 - - 24
13 0.25 - - - 26 - 26
14 0.30 - - - - 28 28
EPPI = 20 x 0.10 + 22 x 0.15 + 24 x 0.20 + 26 x 0.25 + 28 x 0.30
= 2 + 33 + 4.8 + 6.5 + 8.4 = Rs. 25
EVPI = EPPI - EMV of Best Act
= 25 - 22.25 = Rs. 2.75
 Decision Tree Technique
A decision tree is a graphic representation of the decison process indicating
decision acts, states of nature, probabilities attached to the states of nature and conditional
profit and losses. The decision tree consists of nodes and branches. The nodes are of two
types, decision nodes and chance node  square indicates a decision node. There are
number of branches leading from this square. These branches indicate various course of
action available to the decision maker. At the end of each branch there is a  circle which
represents chance node. From these chance nodes, chance events emanate in the form of
sub-branches. The respective pay-offs and probabilities associated with alternate course
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of action and the chance events are shown along the sub-branches. At the terminal of sub
branches are shown the expected values of the outcomes. Following diagram gives a
simplified view of the structure of the decision tree :
Outcomes
Speciment of Decision Tree Q11
E1
p1

p2 Q12
Chance E2
Node p3

E3 Q13

A1

E1 Q21
p1

Decision
A2 p2
Chance E2 Q22
Node Node p3

E3 Q23

A
3

E1 Q31
p1
Chance p2 Q32
Decision Node E2
Node
p3
Chance Node
E3 Q33

A decision tree is highy useful to a decision maker to reach at the optimal act. Using
Roll Back Technique, from forward to the backward, we are able to eliminate unprofitable
branches and determine optimal decision.
Example 4 : A company is evaluating three alternative investment opportunities whose
returns are based on the state of economy. The possible state of the economy and the
associated probabilities is as follows :
State of Economy Excellent Good Fair
Probability 0.2 0.3 0.5
The return for each investment opportunity and each state of the economy are as follows:
Pay of Table (in ‘000 Rs.)
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Alternatives
State of Economy A B C
Excellent 10 6 8
Good 14 10 5
Fair 8 7 6

Using the decision-tree approach, which alternative investment proposal would you
recommend if EMV criteria is to be used.
Expected Payoff

4 0.2 x 10 = 2
0.2
0.3
1 5 0.3 x 14 = 4.2
0.5
EMV=10.2
6 0.5 x 8 = 4
10.2
A 1

7 0.2 x 6 = 1.2
0.2
A2 0.3
D 2 8 0.3 x 10 = 3
0.5
EMV = 7.7
9 0.5 x 7 = 3.5
7.7
A
3

10 0.2 x 8 = 1.6
0.2
3 0.3 0.3 x 5 = 1.5
11
EMV=6.1 0.5

12 0.5 x 6 = 3
6.1

Since node 1 has highest EMV, so the company will opt for alternative A1
Summary
Decision theory is concerned with choosing an optimal course of action from among
several alternatives. Decisions are made under uncertainity and risk. Among the criteria
for taking decision under uncertainity are included maximax, maximin, minimax, Hurwicz
and Laplace criteria. For taking decisions under risk, the criteria included are EMV and
EOL criteria. In addition, the expected value of perfect information (EVPI) is also
calculated. A decision problem can also be depicted and solved using decision tree
approach ( a graphical represenation). In decision tree approach, decision is taken by
computing EMV.
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Quadrant III
 Learn More
Few important sources to learn more on decision theory.
1. Richard I. Levin, David S. Rubin, Statistics for Management, Prentice Hall of India
Private Ltd., New Delhi.
2. R.S. Bhardwaj, Business Statistics, Excel Books, New Delhi
3. U.K. Srivastava, G.V. Shenoy and S.C. Sharma, Quantitative Techniques of
Management Decision, New Age International, New Delhi.
4. N.D. Vohra, Quantitative Techniques for Management, Tata McGraw Hill
5. J.K. Sharma, Business Statistics, Pearson Education
6. H.A. Taha, Operations Research, Pearson Publications.
7. Hira and Gupta, Operations Research, Sultan Chand, New Delhi.
 Points to Ponder
 The decisions taken by a manager govern the fortunes of business — right decison
may make and wrong one may mar.
 Decision criteria under situation of uncertainity is governed by the attitude of decision
maker.
 Decision making under risk is a probabilistic decision situation.
EMV and EOL criteria yields the same decision under risk.
 Decision tree approach is a graphical represenation of the decision making problem.
In decission tree, we choose that branch of the tree to climb which can support us
with greatest strength.
Quadrant IV
Self-Assessment
 Multiple Choice Questions
(Pick the correct answer)
1. A type of decision making environment is
(a) Certainity (b) Uncertainity
(c) Risk (d) All of the above [Ans. (d)]
2. Which of the following criteria is used for decision making under certainity ?
(a) Maximax (b) Maximin
(c) Minimax (d) All the above [Ans. (d)]
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3. Which of the criteria is used for decision making under risk ?

(a) EMV (b) Savage Criterion
(c) Maximax criterion (d) None of the above [Ans. (a)]
4. Regret criterion is also called
(a) Maximax criterion (b) Maximin Criterion
(c) Hurwicz Critera (d) Minimax Criterion [Ans. (d)]
5. Thge value of coefficient of optimism (α) is needed while using the criterion of :
(a) Savage Criterion (b) Wald Criterion
(c) Hurwicz Criterion (d) None of the above [Ans. (c)]
 State whether the statements are True or False
1. Criterion of optimism is also called Wald Criterion. (Ans False)
2. EMV criterion is used when a decision maker takes decisions under condition of
risk. (Ans. True)
3. Acts are referred to the strategy available to the decision maker. (Ans. True)
4. Decision is a tool of decision making. (Ans. True)
5. Maximax decision criterion ia s criterion of pessimism. (Ans. False)
6. EMV and EOL criteria would always yield same optimal solution in any given
problem. (Ans. True)
7. In decision tree, no more than two alternative courses of action can emante from a
decision node. (Ans. False)
 Fill in the blanks with appropriate word
1. The basic function of a manager is to .................. (Ans. take decisions)
2. Pay-off matrix is also known ......... (Ans. profit matrix)
3. Maximax criterion is that of ............ (Ans. Optimism)
4. ................... criterion is a way but between optimistic and pessimistic decision criteria.
(Ans. Hurwicz)
5. Regret criterion is also called .......... criterion (Ans. Savage Criterion)
6. The full form of the abbreviation EVPI is ............... .
(Ans. Expected Value of Perfect Information)
7. When a decision maker has to choose among the several possible alternatives and
the probabilities of occurence of these can be estimated, it is said to be decision
making under condition of ..... (Ans. Risk)