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Operational Risk FM 05

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  Risk              Risk is basically the possibility of something bad happening. In business and finance, the risk is the chance that an investment’s actual outcome will differ from the expected outcome. Risks can include the possibility of losing all or some of the original investment in a business. However, risk can be calculated to some extent using historical data and market factors. It’s also important to note that the higher the risk an investor is willing to take, the greater the protentional return. No investment is free of risks, but there are some investments that have lower practical risks than others. There are two main types of financial risk; they are systematic risks and unsystematic risks.  Systematic risk  can affect the entire economic market or a larger part of the market. This involves interest rate risk,  inflation  risk, sociopolitical risk, and currency risk.  Unsystematic risks , on the other hand, are a type of risk that only affects a specific company or