Risk involves uncertainty about potential future problems or losses. It describes the variability in returns around an expected average outcome. There are several types of risk, including market risk from macroeconomic factors, purchasing power risk from inflation, interest rate risk for bond prices, and business risks from uncertainties like changes in tastes, competition or policies. Financial risk specifically refers to the possibility of sudden monetary losses related to financing.

2. A risk is a potential problem – it might happen or it might not.
Risk involves uncertainty. It may happen or it may not..
“ The variability of return around the expected average is
thus a quantitative description of risk.”
-Fischer & Jordan

3. Risk vs
Uncertainty

6. Market risk :- It is the fluctuation of returns
caused by the macro economic factors
that affect all risky assets.
Sources of market risk include recessions,
political turmoil, changes in interest rates,
natural disasters and terrorist attacks.
Purchasing power risk:- Also known as inflation risk. It is the
chance that the cash flows from an investment won't be
worth as much in the future because of changes in
purchasing power due to inflation. The purchasing power
risk of holding cash rather than a physical asset like gold
or real estate tends to increase when inflation is high
Interest Risk:- Interest rate risk is
the risk that arises for bond owners from
fluctuating interest rates. As interest
rates rise, bond prices fall, and vice
versa. It is the risk taken by bond
investors, that interest rates will rise after
they buy.

8. 1. Business risk:- The term business risk refers to the possibility of inadequate
profits or even losses due to uncertainties e.g., changes in tastes, preferences of
consumers, strikes, increased competition, change in government policy,
obsolescence etc
 Strategic risk:-It’s the risk that your company’s strategy becomes less effective and your
company struggles to reach its goals as a result. It could be due to technological
changes, a powerful new competitor entering the market, shifts in customer demand,
spikes in the costs of raw materials, or any number of other large-scale changes.
Compliance risk:- Are you complying with all the necessary laws and regulations that
apply to your business? But laws change all the time, and there’s always a risk that
you’ll face additional regulations in the future. And as your own business expands, you
might find yourself needing to comply with new rules that didn’t apply to you before.
Operational Risk:- refers to an unexpected failure in your company’s day-to-day
operations.

9. Financial Risk:- the category of financial risk refers specifically to the money flowing in and
out of your business, and the possibility of a sudden financial loss
Reputational Risk :- One negative blog post or product review can spread
online in a flash and change the direction of a company.”
Other Risks:- They include risks from the environment, such as natural disasters,
employee risk management, political and economic instability in countries you import
from or export to.

11. 2. Financial risk:- Financial risk is any of various types of risk
associated with financing, including financial transactions that
include company loans in risk of default. Often it is understood to
include only downside risk, meaning the potential for financial loss
and uncertainty about its extent

12. While some investors will settle for principal protection, most investors are in search of return, specifically alpha
returns. It comprises any change in value and interest or dividends or other such cash flows which the investor
receives from the investment. A loss instead of a profit is described as a negative return.
RETURNS??
ROI:- It measures the gain or
loss generated on
an investment relative to the
amount of money invested.
ROA:- tells you what earnings were
generated from invested capital
(assets).
ROE:- It is a measure of
profitability that calculates how
many dollars of profit a company
generates with each dollar of
shareholders' equity.