Recognizing and Controlling Financial Risks According to Mojtaba Shahdoost a successful Iranian entrepreneur
Financial risk is a term used in relation to jobs, government entities and the financial market in general or individually. The term means risk or probability of losing capital. In other words, financial risk refers to the probability that the actual return on investment will deviate from the expected return. The investor will face financial risk when he is not confident enough about the expected return in the future. Financial risk means risks that can lead to loss of capital in stakeholders. In the case of the government, this means that they are unable to control their monetary policy and default on their debts. Companies also face their default debts, but failure to commit will also create an economic burden on business.
In fact financial risk for certain individuals is such that they have difficulty making economic decisions and their income and ability to pay off the debt they have assumed may be compromised. Financial markets also face financial risk due to the presence of macroeconomic forces, changes in market interest rates and the possibility of default by large sectors or companies. Financial risk comes in many forms and usually affects everyone, so being aware of the risks and how to protect yourself from these problems will help you reduce the risk of financial risk damage.
Risk can be referred to as an unexpected or negative outcome. Any activity that leads to the loss of capital can be considered a kind of financial risk. There are different types of risks that a company may face and overcome, and in general, risks can be classified into three types: business risk, non-commercial risk and financial risk.
Business risk: This type of risk is done by the companies themselves in order to maximize the value of stocks and profits. For example, companies take costly risks in order to market their new products in order to sell more.
Non-commercial risk: These types of risks are not controlled by companies. The risks of political and economic imbalances can be called non-commercial risk.
Financial risk: Financial risk, as its name implies, is the risk that will cause financial loss to firms. Financial risk is generally caused by instability and losses in the financial market due to fluctuations in stock prices, currencies, interest rates and others. These types of risks are taken by the companies themselves in order to maximize the value of stocks and profits. For example, companies take costly risks in order to market their new products in order to sell more.