Before investing time in methods to assess and reduce risk it is essential for the analyst to be aware of what the financial risks can be and what their consequences are. Risk to the financial market can be described as the chance of experiencing a negative and unexpected outcome due to market fluctuations.
These risks may result from an inadequate flow of cash inflow management or lower-than-expected revenue-related in risk projects.
They may be triggered by many reasons like:
Poor project management.
A high amount of debt.
Changes in exchanges or interest rates.
Investments or market transactions that have high levels of risk project.
Insufficient information to make a decision.
Financial Risk Management is among the main concerns of any company across all fields and geographical regions. This is why the exam is called FRM Financial Risk Manager, also called Financial Risk Management Test, and is getting a lot of attention from experts in the field of finance around the world.
FRM is the highest qualification for professionals in risk management around the world. Financial risk management in project management is again the foundational concept of the FRM Level 1 examination. Before gaining a thorough understanding of the strategies to manage risk and the management of risk projects, it is crucial to understand the meaning of risk and also what the different types of risk are. Let's look at different types of risks in this article.
2. What is Risk?
Risk can be defined as the chance of having
an unanticipated or negative result. Any act or
event that results in loss of any kind could be
considered to be a risk project.
4. TYPES OF RISKS THAT FINANCIAL
INSTITUTIONS FACE
Market Risk Liquidity Risk Operational Risk
Legal Risk Credit Risk
5. 1.Market Risk:
2.Liquidity Risk:
This type of risk arises due to fluctuations in the price of
financial Instruments. Risks associated with market
transactions are classified as Non-Directional Risk and
Directional Risk.
This kind of risk is borne because of the inability to
perform transactions. Liquidity risk is classified as Risk of
Asset Liquidity as well as Credit Liquidity Risk.
6. 3.Operational Risk:
4.Legal Risk:
This type of risk can arise due to operational issues like
poor management or technical issues. Operational risk
can be divided in two categories: the categories of
Fraud Risk or Model Risk.
This is one of the commonly occurring types of risk in
project management finance. It comes out of legal
limitations, like lawsuits. When a business has to deal with
financial losses as a result of legal processes, it's a legal
risk.
7. 5.Credit Risk:
This kind of risk occurs when an individual fails to meet the
obligations they have to their counter partners. Credit risk is
classified as sovereign Risk as well as Settlement Risk.