The main parameter under consideration while designing for any project is to minimize the associated risk factors to its full extent. With more clarity, it can be said that a project is so adjusted to reflect the maximum risk cost. The real fact behind this thought is that such an assignment has to meet higher hurdles than the related low-risk ones.

Basically, there are two methods to encounter the risk associated with a venture plan

**Elevating the rate of discount:**

For creating a foundation with the risk-free parameter, a premium rate is to be added to the assignment. This idea can be aggregated into a single term known as the discount rate. The premium value to be paid is in direct proportion to the risk-rate involved. That means, higher the risk, higher also will be the premium cost. Moreover, it is better to have a stronger base than that needs a number of restructuring the future resulting in greater expense.

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Let us consider the example of this particular case. Suppose a business builder offers a future payment of $200,000 within two years of signing the consent. If this payment occurs for sure, then the present value of this future cash would be calculated with an interest rate of 4%. But if in any case, the payment is uncertain, an extra or an appropriate risk premium of 3% should be added, giving a total interest rate of 7% and should be definitely approved. Thus, future payments need a higher discounted rate.

The exact size or the quantity of a business associated risk premium calculation is entirely dependent on the practice of how much an investor demand in extra so as to hold the project securities in an appropriate market.

**Lowering the awaited payment:**

This is an alternative way to the above mentioned. The method adopted here is the reduced flow of cash by adjusting the risk factor. Take for example; suppose a project owner will pay $300,000 in five years. The real amount of payment would be higher or lower than this value after considering or avoiding the risky agents. If he assures giving a payment of $280,000, then this is the matching to the risky $300,000. So better calculate the surety amount using the risk-free interest rate.

It is simple and easy to calculate or determine the apt risk-tuned payment value if we know the exact risk amount and our personal rate of risk.