Risk categories: 1. Credit Risk 2. Country

Risk Definition

Risk is when the entrepreneur
or investor has the concern of
loss of his investment or expecting the required return cannot be earned. Risk measures
the unsure situation during which investor will be investing to take gain a return on his investment. 

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Types of Risk and Uncertainty in a business

All types of risks fall into two categories:

a. Systematic Risk and
b. Unsystematic Risk

Systematic risk, a risk that prevailed within the whole system. It’s the type of risk that covers the entire market or any phase of the market. Each investment that’s created within the market will have this risk, for instance risk of instability within the government, risk of inflation, act of terrorism and war. In
systematic risk a business/company or industry, it’s nearly impossible to be protected. A business cannot avoid from this
systematic risk. 

Unsystematic risk additionally known as specific
risk or residual risk. For a business/company and for a selected industry it’s a unique risk. for instance company court cases, strikes from workers and any reduction in stock necessary for production.
Through diversification a business/company can avoid and reduce
unsystematic risk. 
Following area unit the kinds of
risks underneath these two categories:

1. Credit Risk
2. Country Risk
3. Political Risk
4. Interest
Rate Risk
5. Foreign
Exchange Risk
6. Market Risk
7. Inflation Risk

Uncertainty in Business

Uncertain situation occurs in business when
the future is not known. When uncertainty
is there, the results and outcome are
completely unknown of any event and measure of those outcomes cannot be done. During this uncertain situation a business do
not have any history or background data concerning the event. 

Uncertainty becomes more complicated when it remains for an extended period of time and it’s a difficult task
to resolve problems in that situation and
productivity is also reduced.

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