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Discuss the validity of the following statement: Diversification is a useful technique for handling speculative risk, but it cannot be used to handle pure risk effectively.

Discussion

1. Discuss the validity of the following statement: Diversification is a useful technique for handling speculative risk, but it cannot be used to handle pure risk effectively.

2. From the viewpoint of a proponent of ERM, explain why the traditional “silo” approach to corporate risk management is flawed.