A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Types of Investment Risk

Business Risk
Business Risk

Financial risk refers to a company's ability to manage its debt and financial leverage, while business risk refers to the company's ability to generate sufficient revenue to cover its operational expenses.

image: umsl.edu
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.

image: erm.vcu.edu
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. Traditionally, it refers to the risk that a lender may not receive the owed principal and interest, which results in an interruption of cash flows and increased costs for collection.

Financial Risk
Financial Risk

Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to meet financial obligations. Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to meet financial obligations.

Horizon Risk
Horizon Risk

Investment horizon is the total length of time that an investor expects to hold a security or a portfolio. The investment horizon determines the investor's income needs and desired risk exposure, which aid in security selection.

Inflation Risk
Inflation Risk

Inflationary risk refers to the the risk that inflation will undermine the performance of an investment. Looking at results without taking into account inflation is the nominal return. The value an investor should worry about is the purchasing power, referred to as the real return.

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.

Longevity Risk
Longevity Risk

Longevity risk is risk to which a pension fund or life insurance company could be exposed as a result of higher-than-expected payout ratios. Longevity risk exists due to the increasing life expectancy trends among policyholders and pensioners, and can result in payout levels that are higher than what a company or fund originally accounts for.

Market Risk
Market Risk

BREAKING DOWN 'Market Risk' Market risk and specific risk make up the two major categories of investment risk. The most common types of market risks include interest rate risk, equity risk, currency risk and commodity risk.

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.

Operational Risks
Operational Risks

Operational risk summarizes the risks a company undertakes when it attempts to operate within a given field or industry. Operational risk is the risk not inherent in financial, systematic or market-wide risk.

Other Risks
Other Risks

Market risk, also called systematic risk, is a risk that will affect all securities in the same manner. In other words, it is caused by some factor that cannot be controlled by diversification. This is an important point to consider when you are recommending mutual funds, which are appealing to investors in large part because they are a quick way to diversify.

Reinvestment Risk
Reinvestment Risk

Reinvestment risk is the risk that future coupons from a bond will not be reinvested at the prevailing interest rate from when the bond was initially purchased.

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.

image: ww2.cfo.com
Strategic Risk
Strategic Risk

Strategic Risk Management Lab in the Kellstadt Graduate School of Business and Ledger & Quill Alum-ni Foundation Distinguished Profes-sor in the School of Accountancy at DePaul University in Chicago. He also is an advisor to management teams and boards in the area of Strategic Risk Management and strategy development and execution, and he is an IMA member.

source: markfrigo.org
image: erm360.com
Systemic Risk
Systemic Risk

Systemic risk is the possibility that an event at the company level could trigger severe instability or collapse in an entire industry or economy.