RISK
LIQUIDITY RISK- occurs when an individual
Risk is commonly defined as:
1. A situations wherein one is exposed to danger
2. Exposure to danger, harm,or loss
CONCEPT OF RISK
A PROBABILITY- A probability that a future event may
impact an organization negatively
AN EXPOSURE –to the possibility of incurring loss and
circumstances, as wll as variability.
IS INHERENT- always present in organization and
entreprenuershi. Without risk there will be a
meaningful gain. However, even it’s inherent it can be
managed or mitigated.
RISK CLASSIFICATION
SYSTEMATIC – Not fully controllable
Can’t be fully assessed and anticipated
Usually macro.
SPECIFIC – CAN BE CONTROLLED
Can be assessed in advance and mitigated using
different techniques
USUALY MICRO.
RISK CLASSIFICATION
FINACIAL RISK – Risk with a DIRECT impact on entity
NON FINANCIAL RISK- Risk without financial impact on
entity
FINANCIAL RISK EXAMPLES
1. MARKET RISK-comes from movements within
financial market environment. Such movements
include shifts in share, prices, interest rates,
exchange rates, commodityprics and other
economic or industry market factors.
2. CREDIT RISK- subsets are default counterpart
risk. It is the risk of loss due to the failure of one
party to pay the other an outstanding obligation
3.
investor, business or financial institution cannot
meet its short term debt obligations.
NON FINANCIAL RISK EXAMPLES
1. SETLEMENTS RISK-the possibility that one more
parties will fail to deliver on the terms of a
contract at the agreed upon time
2. LEGAL RISK – risk of being sued
3. COMPLIANCE RISK – An update of laws and
regulations may create the need for financial
restatement back taxes or other penalties.
4. OPERATIONAL RISK- employee actins that is
finavially costly.
5. SOLVENCY RISK- a company’s ability to meet
long term debts and continue operating into the
future.
6. Documenting every thing for the future.
RISK MANAGEMENT
According to ISO 31000
It is the identification, assessment and
prioritation of risk followed by coordinated and
economical application of resources to
minimize the realization of opportunities.
THIS INCLUDES
1. Risk planning
2. Developing risk handling options
3. Monitoring risk to determine how risks
have changed
4. Documenting overall risk management
program
RISK MANAGEMENT SHOULD
1. CREATE VALUE
2. ADRESS UNCERTAINTY AND ASSUMPTIONS
 3. BE AN INTEGRAL PART OF THE ORG PROCESS
AND DECISION MAKING
4. BE DYNAMIC ITERATIVE, TRANSPARENT
TAILORABLE AND RESPONSIVE TO CHANGE
5. CREATE CAPABILITY OF CONTINUAL
IMPROVEMENT AND ENCHANCEMENT
CONSIDERING THE BEST AVAILABLE INFO AND
HUMA FACTORS
6. BE SYSTEMATIC STUCTURED, AND
CONTINUALLY OR PERIODICALLY REASSESSED

5- STEP RISK MANAGEMENT STADARDS(ISO31000)

1. Identify the risk

2. Analyze the likelihood and impactof each one.
3. Prioritize risk based on the business objectives
4. Treat( or respond to) the risk conditions
5. Monitor results and adjust as necessary.