Question

In the context of risk management, what are the biggest types of risks facing the financial markets today? Explain your reasoning.

Answer 1

RISK

Risk implies future uncertainty about deviation from expected earnings or expected outcome. Some times many factors will affect our earnings. So these factors can be considered as the risk for business.

RISK MANAGEMENT

   Risk management is the process of identifying risk and make a proper analysis about the same and also taking the precautionary steps to avoid such risk in the business. So risk management helps to minimize the risk in the business.

There are different kind of risk factors are there and while conducting a business we should face all those risk in order to get success. So proper risk management is very necessary for all the business. Literally risk is classified as two say systematic risk and non systematic risk. In systematic risk it is a concept that the risk affected to a few companies will affect the whole sector. But in unsystematic risk it will not affect the whole economy but will affect individual comapny. Counterparty risk, interest rate risk, and liquidity risks are some example of financial market risk. Today in financial market the main risk is associated with price fluctuation. Now a days the price of the shares and other financial instruments are not constant and it shows a high volatility. So the investors can not make investment because they want to face a lot of risk. Higher level of volatility shows the higher movements of price. So the fluctuating shares are very riskier to buy. Today we know due to the issues share price are generally too low and nobody is willing to make huge investment because of the uncertainity of tomorrow. So this will leads to the financial market crash. So it is very important to make stable our financial market through proper risk management schemes and market analysis.

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