Explain the risks related to conditions of the money and capital market.
Answers
Answer:
Financial risk is a term that can apply to businesses, government entities, the financial market as a whole, and the individual. This risk is the danger or possibility that shareholders, investors, or other financial stakeholders will lose money.
There are several specific risk factors that can be categorized as a financial risk. Any risk is a hazard that produces damaging or unwanted results. Some more common and distinct financial risks include credit risk, liquidity risk, and operational risk.
The Basics of Financial Risk
Financial risk is a type of danger that can result in the loss of capital to interested parties.
For governments, this can mean they are unable to control monetary policy and default on bonds or other debt issues.
Corporations also face the possibility of default on debt they undertake but may also experience failure in an undertaking the causes a financial burden on the business.
Individuals face financial risk when they make decisions that may jeopardize their income or ability to pay a debt they have assumed.
Financial markets face financial risk due to various macroeconomic forces, changes to the market interest rate, and the possibility of default by sectors or large corporations.
Financial risks are everywhere and come in many different sizes, affecting everyone. You should be aware of all financial risks. Knowing the dangers and how to protect yourself will not eliminate the risk, but it will mitigate their harm.