What are the risks? (2024)

FAQs

What are the 3 main types of risk? ›

to do something or to enter a situation where there is a possibility of being hurt or of a loss or defeat: He risked his life helping another man escape the fire. We risk losing the business if we don't pay off the loan on time.

Risk can come in various forms and can be categorized into four main categories: financial risk, operational risk, strategic risk, and compliance risk.

General risk means the risk of loss (arising from changes in interest rate, equity prices, exchange rate and commodity prices in the value of a bank's trading book positions held in debt securities, equities, foreign exchange (including gold), commodities and other related derivative contracts.

Defining Connected Risk

A connected risk approach aims to connect risk owners to their risks and promote organization-wide risk ownership by using integrated risk management (IRM) technology to enable improved Communication, Context, and Collaboration — remember these as the three C's of connected risk.

Risk categories classify risks based on common characteristics, sources, or impacts, allowing for a systematic and comprehensive approach to risk management. Common risk categories include strategic risks, operational risks, financial risks, compliance risks, and reputational risks.

While the types and degree of risks an organization may be exposed to depend upon a number of factors such as its size, complexity business activities, volume etc, it is believed that generally the risks banks face are Credit, Market, Liquidity, Operational, Compliance / Legal /Regulatory and Reputation risks.

These risks have names—inflation, deflation, confiscation, and devastation—and any useful discussion of portfolio design of necessity incorporates their probabilities, consequences, and costs of mitigation.

The five main types of systematic risk include market risk, interest rate risk, purchasing power/inflation risk, and exchange rate risk. Market risk functions like a string of dominoes in that the tipping of one can cause others to topple. Investors tend to follow the movements of the market.

What are the 9 categories of risk? ›

The OCC has defined nine categories of risk for bank supervision purposes. These risks are: Credit, Interest Rate, Liquidity, Price, Foreign Exchange, Transaction, Compliance, Strategic and Reputation. These categories are not mutually exclusive; any product or service may expose the bank to multiple risks.

The Project Management Body of Knowledge (PMBOK) sorts project risk into three categories: operational risks, short-term strategic risks, and long-term strategic risks.