The document discusses different types of business risks and financial risks. It defines business risk as threats that could prevent a company from achieving its financial goals. The main types of business risks are strategic risk, operational risk, legal risk, reputational risk, compliance risk. Financial risk is the possibility of losing money on investments. The primary types of financial risks are credit risk, market risk, liquidity risk, valuation risk. Credit risk is the risk of defaulting on loans. Market risk relates to volatility in markets. Liquidity risk impacts the ability to meet short-term financial obligations. Valuation risk is the loss from a difference between accounting and market values.

1. POWERPOINT
PRESENTATION
MBA- Finance 069
F i n a n c e 0 6 9
Business Risk
and
Financial Risk

2. POWERPOINT
PRESENTATION
MBA- Finance 069
PRESENTERS

3. HOW MUCH RISK ARE
YOU WILLING TO
TAKE?
Is the effect of uncertainty on objectives.

5. BUSINESS RISKS
refers to a threat to the company’s ability to achieve
its financial goals.
The risk associated with a company’s operating
performance
implies uncertainty in profits or danger of loss and
the events that could pose a risk due to some
unforeseen events in future, which causes business to
fail.
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6. TYPES
OF
BUSINESS RISKS
Business risk is a broad category. It applies to any event or circumstance that has the potential to
prevent you from achieving your business goals or objectives.
Business risk can be internal (such as your strategy) or external (such as the global economy).

7. STRATEGIC
RISK
TYPES
OF
BUSINESS RISKS
Refers to the internal and external events that may
make it difficult, or even impossible, for an
organization to achieve their objectives and strategic
goals.
Relate to strategic decisions or objectives set by the
board
Are long-term, affecting an organization's future
the potential impact of strategic decisions, or of a
defective or inappropriate strategy

8. OPERATIONAL
RISK
TYPES
OF
BUSINESS RISKS
Refers to the risk of direct and indirect loss resulting
from inadequate or failed internal processes,
people and systems or from external events. It
includes Legal Risk but excludes reputational and
strategic risks.
the risk of loss resulting from inadequate or failed
internal processes, people and systems, or from
external events.

9. LEGAL
RISK
TYPES
OF
BUSINESS RISKS
refers to damage or any loss incurred to a business due
to negligence in compliance with laws related to the
business.
Legal risk is the likelihood of financial or reputational
loss resulting from a lack of knowledge (or
misunderstanding) of how the law applies to your
business, or operating with a reckless indifference to
the law and how it applies.
Legal risk management starts with identifying possible threats, which
could cause loss or disruption to your business, enabling you to
implement processes to minimize or negate them
risk arising from failure to comply with statutory or
regulatory obligations.

10. REPUTATIONAL
RISK
TYPES
OF
BUSINESS RISKS
The loss to the good name or standing of an
organization arising due to any malpractices or any
criminal event
Reputational risk arises due to the involvement of
employees or other peripheral parties.
Reputational risk is the damage that can occur to a
business when it fails to meet the expectations of its
stakeholders and is thus negatively perceived. It can
affect any business, regardless of size or industry.
Chance of losses due to declining reputation as a result
of practices or incidents that are perceived as dishonest
, disrespectful or incompetent.

11. COMPLIANCE
RISK
TYPES
OF
BUSINESS RISKS
Compliance risk is an organization's potential
exposure to legal penalties, financial forfeiture and
material loss, resulting from its failure to act in
accordance with industry laws and regulations,
internal policies or prescribed best practices.
Also known as Integrity Risk
is the potential for losses and legal penalties due to
failure to comply with laws or regulations.

12. FINANCIAL
RISKS
Financial risk is the possibility of losing money on an
investment or business venture.
Financial risk is a type of danger that can result in the
loss of capital to interested parties.
Financial risk refers to your business' ability to manage
your debt and fulfill your financial obligations. This type
of risk typically arises due to instabilities, losses in the
financial market or movements in stock prices,
currencies, interest rates, etc.
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13. CREDIT
RISK
TYPES
OF
FINANCIAL RISKS
also known as default risk—is the danger associated
with borrowing money.
Credit risk is the probability of failing to pay to a creditor
(such as a bank or a lender) or another party (eg a
supplier). You may also incur credit risk by extending
credit to customers, due to the possibility of them
defaulting on payment.
Credit risk is the possibility of a loss resulting from a
borrower's failure to repay a loan or meet contractual
obligations.

14. MARKET
RISK
TYPES
OF
FINANCIAL RISKS
Market risk relates to the probability of incurring a loss
due to things like market volatility, hikes in interest
rates or raw material costs, fluctuation in foreign
currency values, etc.
Market risk is the risk that arises from movements in
stock prices, interest rates, exchange rates, and
commodity prices.
Market risk is distinguished from credit risk, which is the
risk of loss from the failure of a counterparty to make a
promised payment, and also from a number of other
risks that organizations face, such as breakdowns in
their operational procedures.

15. LIQUIDITY
RISK
TYPES
OF
FINANCIAL RISKS
Liquidity risk affects your ability to meet short-term
financial demands to execute your business
transactions. Key sources of risk are potential cashflow
problems, because of things like the seasonal
downturn in revenue, lack of buyers for your assets or
inefficient market.
Liquidity is the ability of a firm, company, or even an
individual to pay its debts without suffering catastrophic
losses.
Liquidity risk is a financial risk that for a certain period
of time a given financial asset, security or commodity
cannot be traded quickly enough in the market without
impacting the market price.

16. VALUATION
RISK
TYPES
OF
FINANCIAL RISKS
Valuation risk is the risk that an entity suffers a loss
when trading an asset or a liability due to a difference
between the accounting value and the price effectively
obtained in the trade
Valuation risk is the risk of loss arising from the
difference between the price of an instrument reported
on a bank’s balance sheet – as determined by
accounting rules – and the actual price a bank would
obtain if it sold that instrument (if it is an asset) or the
price a bank would pay to buy it or transfer it to a third
party (in the case of a liability).

18. Thank
You!