Explain five types of risk that FI might face

Explain five types of risk that FI might face

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Expert Solution

Financial risks which are faced by the financial institutions are Market Risk, Credit Risk, Liquidity Risk, Operational Risk, and Legal Risk.

Market Risk : This type of risk arises due to the fluctuations in the prices of financial instruments.
Credit risk : This type of risk arises when the customers of the financial institutions fail to fulfill their obligations towards the FI. It is the possibility that a customer may default on loans.
Liquidity Risk : This type of risk arises out of an inability of the company to execute transactions. Liquidity risk is the easily ease convertibility of its assets into cash.
Operational risk : This type of risk arises out of a company's ordinary business activities such as mismanagement, technical failures, fraud risk, personnel problems etc
Legal risk : These types of financial risk are the risks related to legal constraints such as lawsuits. These are the financial losses out of legal proceedings.

jeff jeffy answered 2 years ago

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