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Financial advisory
RES5Financial Advisory Services✓For the law of large numbers to operate effectively within a pool, the risks should ideally be:
Reliable forecasting requires a large number of similar, independent exposures so that outcomes average out. Few and varied risks undermine predictability, risks all exposed to one event are correlated and defeat pooling, and concentrating on one high-risk group reduces balance.
Correlated risks (all hit by one event) break the independence the law relies on.
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