Financial risk of an enterprise means the possibility of adverse financial consequences in the form of loss of income and capital in a situation of uncertainty in the conduct of its financial activities.
Financial risks are highly diverse and are classified according to the following main characteristics for effective management:
By type. This classification characteristic of financial risks is the main parameter of their differentiation in the management process.
The characteristic of a particular risk type simultaneously gives an idea of the factor generating it, which allows to "link" the assessment of the probability of occurrence and size of possible financial losses for this risk type to the dynamics of the corresponding factor.
The species diversity of financial risks in their classification system is represented in the broadest range.
It should be noted, however, that the emergence of new financial instruments and other innovative factors will generate new types of financial risks accordingly.
Today, the main types of financial risks of an enterprise include:
- Risk of financial stability (or risk of financial imbalance).
This risk is generated by imperfections in the structure of capital (excessive share of debt used), which create imbalances in the positive and negative cash flows of the enterprise in terms of volumes.
The nature of this risk and the form of its manifestation are considered in the process of presentation of the financial leverage.
As part of financial risks about the degree of danger (generated threats of bankruptcy of the enterprise), this type of risk plays a leading role.
- Enterprise insolvency risk.
This risk is generated by a decrease in the liquidity of working assets, resulting in an imbalance in the positive and negative cash flows of the enterprise over time.
This type of risk is also among the most dangerous in terms of its financial implications.
- Investment Risk.
It describes the potential for financial losses in an enterprise 's investment activities.
According to the types of these activities, the types of investment risk are divided - the risk of real investment and the risk of financial investment.
All the types of investment-related financial risks considered are so-called "complex risks," which in turn fall into separate subspecies.
For example, risks of late completion of design work may be identified as part of the risk of real investment;
Untimely completion of construction and installation works; Late opening of financing for the investment project; Loss of investment attractiveness of the project due to possible reduction of its efficiency, etc. Since all subspecies of investment risks are related to possible loss of capital of the enterprise, they are also included in the group of most dangerous financial risks.
- Inflationary risk.
In an inflationary economy, it is singled out as a financial risk.
This type of risk is characterized by the possibility of impairment of the real value of capital (in the form of financial assets of the enterprise), as well as the expected income from financial transactions under conditions of inflation. Since this type of risk in modern conditions is permanent and accompanies almost all financial transactions of the enterprise, in financial management it is given constant attention.
- Interest rate risk.
It consists of an unexpected change of interest rate in the financial market (both deposit and credit).
The reason for this type of financial risk (if we eliminate the previously considered inflationary component of it) is the change of financial market conditions under the influence of state regulation, growth or decrease of supply of free monetary resources and other factors.
The negative financial consequences of this type of risk are manifested in the issuing activities of the enterprise (with the issue of both shares and bonds), in its dividend policy, in short-term financial investments and some other financial transactions.
- Currency risk.
This type of risk is inherent in the enterprises conducting foreign economic activity (importing raw materials, materials and semi-finished products and exporting finished goods).
It is manifested in the loss of the envisaged income as a result of the direct interaction of the change in the exchange rate of foreign currency used in the foreign economic transactions of the enterprise with the expected cash flows from these transactions.
Thus, by importing raw materials and materials, the enterprise loses from the appreciation of the exchange rate of the corresponding foreign currency relative to the national currency.
The depreciation of this rate determines the loss of the enterprise when exporting finished products.
- Deposit risk.
This risk reflects the possibility of non-return of deposit (non-receipt of deposit certificates).
It is relatively rare and is associated with misjudgment and the unsuccessful choice of a commercial bank to carry out the deposit operations of an enterprise.
Nevertheless, cases of deposit risk realization occur not only in our country, but also in countries with developed market economies.
- Credit risk.
It occurs in the financial activity of an enterprise when providing commodity (commercial) or consumer credit to buyers.
The form of its manifestation is the risk of non-payment or late settlement for finished products issued by the enterprise on credit, as well as exceeding the estimated budget for debt collection.
- Tax risk.
This type of financial risk has several manifestations:
- the possibility of introducing new types of taxes and fees for certain aspects of business activity;
- The possibility of increasing the level of existing taxes and fees;
- Changing the terms and conditions of individual tax payments;
- Possibility of cancellation of existing tax incentives in the sphere of economic activity of the enterprise.
Being unpredictable for the enterprise (as evidenced by modern domestic fiscal policy), it has a significant impact on the results of its financial activities.
- Structural risk.
This type of risk is generated by inefficient financing of the operating costs of the enterprise, resulting in a high proportion of the total fixed costs.
A high rate of operating leverage in case of adverse changes in the commodity market and a decrease in the gross positive cash flow for operating activities generates a significantly higher rate of reduction of the net cash flow for this type of activity (the mechanism of manifestation of this type of risk is considered in detail when presenting the issue of operating leverage).
- Criminal risk.
In the sphere of financial activity of enterprises, it is manifested in the form of the declaration of fictitious bankruptcy by its partners; Forgery of documents ensuring misappropriation of money and other assets by third parties; Theft of certain types of assets by own personnel and others.
The significant financial losses incurred by enterprises at the present stage result in the allocation of crime risk into an independent type of financial risk.
- Other types of risk.
The Other Financial Risk Group is quite extensive, but it is not as significant to enterprises as discussed above in terms of likely occurrence or level of financial loss.
These include natural disaster risks and other similar "force majeure risks," which can lead not only to the loss of the envisaged sub-code, but also part of the assets of the enterprise (fixed assets; stocks of inventory items); Risk of late settlement and cash transactions (related to unsuccessful selection of the servicing commercial bank); Risk emission and others.