Scribd
Upload
2 views1 page

What Is Risk

The document discusses the concept of risk, defining it as the chances of experiencing unexpected or negative outcomes, and categorizes risks into non-financial and financial types. Non-financial risks include business risks, which are taken by firms to maximize shareholder value, and non-business risks, which arise from external factors beyond a firm's control. Financial risks pertain to a company's ability to manage debt and leverage, further divided into market, credit, liquidity, and operational risks.

Uploaded by

Mazhar Ali Joyo
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
2 views1 page

What Is Risk

The document discusses the concept of risk, defining it as the chances of experiencing unexpected or negative outcomes, and categorizes risks into non-financial and financial types. Non-financial risks include business risks, which are taken by firms to maximize shareholder value, and non-business risks, which arise from external factors beyond a firm's control. Financial risks pertain to a company's ability to manage debt and leverage, further divided into market, credit, liquidity, and operational risks.

Uploaded by

Mazhar Ali Joyo
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Risk can be referred to like the chances of having an unexpected or negative outcome.

Any action or
activity that leads to loss of any type can be termed as risk. There are different types of risks that a firm
might face and needs to overcome. There are different types of risks a firm might face and needs to
overcome or minimized. These risks can be categorized into

1) Non-financial risk a) Business risk b) Non-business risk


2) Financial Risk

Non-financial risk: These types of risks are not under the control of firms but impact them. Risks that do
not arise from the direct business of the organization can be termed as non-business risk. These include

a) Business risk: These types of risks are taken by business enterprises themselves to maximize
shareholder value and profits. Risk in business refers to company’s ability to generate sufficient revenue
to cover its operational expenses or achieve its financial goals. (unable to function as profitable)

b) Non-business risk (Strategic Risk) These types of risks are not under the control of firms. Risks that
arise out of political and economic imbalances can be termed as non-business risk.

Financial risk: refers to company’s ability to manage its debt and financial leverage (unable to pay
debts). Financial risk can be further categorized into

a) Market risk (interest rate, exchange price, equity price, commodities price risk)
b) Credit risk (downgrade, default, credit spread risk)
c) Liquidity risk
d) Operational Risk

You might also like