![]() Operational risk can be classified into Fraud Risk and Model Risk. This type of risk arises out of operational failures such as mismanagement or technical failures. Asset Liquidity risk arises either due to insufficient buyers or insufficient sellers against sell orders and buys orders respectively. Liquidity risk can be classified into Asset Liquidity Risk and Funding Liquidity Risk. This type of risk arises out of an inability to execute transactions. Settlement risk, on the other hand, arises when one party makes the payment while the other party fails to fulfill the obligations. Sovereign risk usually arises due to difficult foreign exchange policies. Credit risk can be classified into Sovereign Risk and Settlement Risk. This type of risk arises when one fails to fulfill their obligations towards their counterparties. Non-Directional risk, on the other hand, can be volatility risks. Directional risk is caused due to movement in stock price, interest rates and more. Market risk can be classified as Directional Risk and Non-Directional Risk. ![]() This type of risk arises due to the movement in prices of financial instrument. Based on this, financial risk can be classified into various types such as Market Risk, Credit Risk, Liquidity Risk, Operational Risk, and Legal Risk. Financial risk is caused due to market movements and market movements can include a host of factors. Risks are classified into some categories, including market risk, credit risk, operational risk, strategic risk, liquidity risk, and event risk.įinancial risk is one of the high-priority risk types for every business. Risk Types: The different types of risks are categorized in several different ways. Making a career in project management has never been this easy! Enroll in our Post Graduate Program in Project Management to get started today! Types of Financial Risks Financial risk generally arises due to instability and losses in the financial market caused by movements in stock prices, currencies, interest rates and more. Risks that arise out of political and economic imbalances can be termed as non-business risk.įinancial Risk as the term suggests is the risk that involves financial loss to firms. These types of risks are not under the control of firms. ![]() As for example, companies undertake high-cost risks in marketing to launch a new product in order to gain higher sales. These types of risks are taken by business enterprises themselves in order to maximize shareholder value and profits. Widely, risks can be classified into three types: Business Risk, Non-Business Risk, and Financial Risk. There are different types of risks that a firm might face and needs to overcome. Any action or activity that leads to loss of any type can be termed as risk. ![]() Risk can be referred to like the chances of having an unexpected or negative outcome. Learn for free! Subscribe to our YouTube Channel & Be a Part of 400k+ Happy Learners Community. ![]()
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