Counterparty Risk

This is a preview of a concept contained in The Personal MBA by Josh Kaufman, a book that will help you master the fundamentals of business, hone your business instincts, and save a fortune in tuition. The Personal MBA distills the most powerful principles of business and delivers them quickly and concisely. Order your copy now…

What is “Counterparty Risk”?

“The man who makes everything that leads to happiness depend upon himself, and not upon other men, has adopted the very best plan for living happily.” — Plato, ancient Greek philosopher

Key Points:

• Counterparty Risk is the possibility that other people won’t deliver what they have promised.
• The more your system depends on other people, the higher the risk of failing.
• If your system relies on the performance of other people, you need to prepare for the possibility that they won’t reach your expectations.

Questions for Consideration:

• Are other parties responsible for supplying inflows or processes in your system?
• What is the risk that they won’t perform as expected, and how would a failure effect your system?
• Can you minimize or mitigate that risk?

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