Types of Financial Risk

After you know that a financial risk is a form of loss that has an impact on finances, then
let's understand the types of financial risks that exist.

General Financial Risk

In general, financial risk is divided into two, namely systematic financial risk and non-
systematic financial risk.

1. Systematic Risk

It is a financial risk that cannot be predicted or avoided due to several factors. For
example, a pandemic, political climate

2. Non-systematic risk

Is a financial risk that befalls a person, organization, or group due to an event. For
example loss, illness, or death.

Personal / Individual Financial Risk

A financial risk is an event that can happen to anyone. Including yourself. There are at
least 4 risks included in it, namely income risk, expenditure risk, asset or investment risk,
and credit risk.

1. Income Risk

Income risk is a variety of risks that affect a person's ability to earn income. Examples
include physical disabilities that make it difficult to work, getting laid off or losing your
job and death.

2. Expenditure Risk

is the risk that arises when we use the money to meet needs but the existing expenditure is
greater than income. For example accidents, vehicle damage, home renovations due to an
incident, and much more.)

3. Asset / Investment Risk

is the risk that arises because the investment instrument or assets owned experience
several obstacles. These include loss of investment assets, theft or damage to assets you
own
4. Credit / Debt Risk

Is the inability to pay debts, financial penalties, being trapped in debt with high-interest
rates, and others.

Financial Risk Based on Time Period

When viewed in time, financial risk is a risk that can be divided into two, namely short-
term and long-term financial risk.

1. Short-Term Financial Risk

This type of financial risk arises at an unexpected and relatively short time. For example,
a vehicle that suddenly breaks down due to a flat tire, so you need to spend some money
to handle it.

2. Long-Term Financial Risk

This financial risk has a fairly serious impact on your finances in the long term. For
example, if death that befell the backbone of a family, when this happens the family left
behind will experience difficulties in the form of loss of the main source of income.

Financial Risk Based on Impact

The last type of financial risk is financial risk based on its impact. Divided into three risks
as described below.

1. Pure Risk

Pure risk is a risk that has a direct impact. For example, your vehicle broke down in the
morning. This strike has an impact on your delay in getting to the office on time.

2. Specific Risk

is a risk whose impact can only be felt by the individual or other people related to the
individual. For example, a house fire in a complex.

3. Static Risk

is the risk that occurs due to the loss of assets or property due to an incident. An example
is a fire. However, this risk will not have an impact on a person's finances.

Qs: What factors influence financial risk? external factors - including economic
downturns,
industry changes, law changes, etc.

- internal factors - including underperformance, poor cashflow management, bad

investments, new competition, staff issues, etc.