Answer to Question #307371 in Finance for Comfort

Question

Explain the types of risks in 2008 financial crisis?

Answer 1

Types of risks in 2008 financial crisis

Credit Risk -This is the financial risk that occurs when a borrower fails to pay the amount they had agreed with the lender making the lender to lose some finances. They include credit default risk, concentration risk, institutional risk etc.

Liquidity risk - This is the financial risk that occurs when an investor, company or an individual is not in a position of converting some assets to cash so as to pay a short term debt. They include cashflow risk, product risk etc.

Legal risk- This is the financial risk that occurs when one losses some finances due to misunderstanding or lacking information on the way the government laws and regulations apply to his/her business.

Operational risk- This refers to the financial risk that results from failures that occurs due to employees actions or failure from the company's working system caused by machine breakdowns that may lead to financial losses.

Market risk - This refers to the risk of losing finances on investments due to price and volatility movements adversely.