Thursday, April 2, 2015

Classification of risk in business?

Classification of risk in business?
Systematic risk is risk inherent in the market, or system. Systematic risk includes recession, high inflation and a bear market. It's measured by beta -- the stock's correlation to an overall market. Many investors and money managers use the Standard & Poor's 500 Index as their proxy for the market.

Unsystematic risk is risk associated with a company. That can include risk related to management, sector (or industry) characteristics, labor strikes, and bad press.

Total risk is systematic risk plus unsystematic risk.
The following are some other risks common to all businesses.Actuarial risk: risk an insurance underwriter covers in exchange for premiums, such as the risk of premature death.
Exchange risk: chance of loss on foreign currency exchange.
Inflation risk: chance that the value of assets or of income will be eroded as inflation shrinks the value of a country's currency.
Interest rate risk: possibility that a fixed-rate debt instrument will decline in value as a result of a rise in interest rates.
Inventory risk: possibility that price changes, obsolescence, or other factors will shrink the value of inventory .
Liquidity risk: possibility that an investor will not be able to buy or sell a commodity or security quickly enough or in sufficient quantities because buying or selling opportunities are limited.
Political risk: possibility of nationalization or other unfavorable government action.
Repayment (credit) risk: chance that a borrower or trade debtor will not repay an obligation as promised.
Risk of principal: chance that invested capital will drop in value.
Underwriting risk: risk taken by an investment banker that a new issue of securities purchased outright will not be bought by the public and/or that the market price will drop during the offering period.
I hope this serves your need. If need further clarification or any further help feel free to contact me @ vipinpvarghese@yahoo.com.

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