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Types of Business Risk

Compliance Risk
Compliance Risk

Compliance risk is exposure to legal penalties, financial forfeiture and material loss an organization faces when it fails to act in accordance with industry laws and regulations, internal policies or prescribed best practices.

Credit Risk
Credit Risk

Credit risk is the probable risk of loss resulting from a borrower's failure to repay a loan or meet contractual obligations. Credit risk is the probable risk of loss resulting from a borrower's failure to repay a loan or meet contractual obligations.

Liquidity Risk
Liquidity Risk

Liquidity risk is the risk that stems from the lack of marketability of an investment that cannot be bought or sold quickly enough to prevent or minimize a loss. Liquidity risk is typically reflected in unusually wide bid-ask spreads or large price movements.

Market Risk
Market Risk

Liquidity risk compounds other risks, such as market risk and credit risk. It cannot be divorced from the risks it compounds. A convenient distinction for us to make is that between market risk and business risk. Market risk is exposure to the uncertain market value of a portfolio.

Moral Hazard
Moral Hazard

Moral hazard is the risk that a party to a transaction has not entered into the contract in good faith, or has an incentive to take unusual business risks. Moral hazard is the risk that a party to a transaction has not entered into the contract in good faith, or has an incentive to take unusual business risks.

Operational Risk
Operational Risk

Operational risk is the risk not inherent in financial, systematic or market-wide risk. It is the risk remaining after determining financing and systematic risk, and includes risks resulting from breakdowns in internal procedures, people and systems.

Operational Risks
Operational Risks

Operational risk is the risk not inherent in financial, systematic or market-wide risk. It is the risk remaining after determining financing and systematic risk, and includes risks resulting from breakdowns in internal procedures, people and systems.

Other Risks
Other Risks

Business risk is the possibility a company will have lower than anticipated profits or experience a loss rather than taking a profit. Business risk is influenced by numerous factors, including sales volume, per-unit price, input costs, competition, the overall economic climate and government regulations.

Reputational Risk
Reputational Risk

Reputational risk is a threat or danger to the good name or standing of a business or entity. Reputational risk can occur through a number of ways: directly as the result of the actions of the company itself; indirectly due to the actions of an employee or employees; or tangentially through other peripheral parties, such as joint venture partners or suppliers.

Strategic Risk
Strategic Risk

For example, strategic risk might arise from making poor business decisions, from the substandard execution of decisions, from inadequate resource allocation, or from a failure to respond well to changes in the business environment.

Systemic Risk
Systemic Risk

Systemic risk is the possibility that an event at the company level could trigger severe instability or collapse an entire industry or economy. Systemic risk was a major contributor to the financial crisis of 2008.

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