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- Entrepreneurial risks
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* Classification of financial risks
* Characteristics of financial risk
* Method of avoiding financial risk
* Financial risk concentration limitation
* Method of diversification of financial risk
* Financial risk allocation method
* Systemic financial risk
- Bank risks
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Characteristics of financial risk

Financial risk is one of the most complex business categories with the following main characteristics:

  • Economic nature.
    Financial risk manifests itself in the sphere of economic activity of the enterprise, is directly related to the formation of its profit and is characterized by its possible economic losses in the process of financial activity. Given the economic forms listed, financial risk is characterized as an economic category, taking a place in the system of economic categories related to the implementation of the economic process.
  • Objectivity of manifestation.
    Financial risk is an objective phenomenon in the operation of any enterprise. Risk accompanies almost all types of financial transactions and all directions of financial activity of the enterprise. Although a number of financial risk parameters depend on subjective management decisions, the objective nature of its manifestation remains unchanged.
  • Realization probability.
    The probability of a category of financial risk is that the risk event may or may not occur in the course of the financial activity of the enterprise. The extent of this probability is determined by the effect of both objective and subjective factors, but the probabilistic nature of financial risk is a constant characteristic of it.
  • Uncertainty of consequences.
    This characteristic of financial risk is determined by the non-determinability of its financial results, first of all, the level of profitability of the financial transactions carried out. The expected level of financial performance may vary depending on the type of risk in a fairly large range. Financial risk can be accompanied by both significant financial losses to the enterprise and the generation of additional revenues.
  • The expected adversity of consequences.
    The effects of financial risk can be characterized by both negative and positive indicators of financial performance, a risk that in business practice is characterized and measured by the level of possible adverse effects. This is due to the fact that a number of extremely negative consequences of financial risk determine the loss not only of income, but also of capital of the enterprise, which leads to bankruptcy (i.e. irreversible negative consequences for its activities).
  • Variability of level.
    The level of financial risk inherent in a financial transaction or particular type of financial activity of an enterprise is not constant. First of all, financial risk varies considerably in time, i.e. depends on the duration of the financial transaction, as the time factor has an independent impact on the level of financial risk (manifested through the level of liquidity of the invested funds, uncertainty of the movement of the loan interest rate in the financial market, etc.). In addition, the measure of financial risk varies significantly due to numerous objective and subjective factors that are in constant dynamics.
  • Subjectivity of assessment.
    Despite the objective nature of financial risk as an economic phenomenon, its main estimate - the level of risk - is subjective. This subjectivity, i.e. inequality of assessment of this objective phenomenon, is determined by different level of completeness and reliability of information base, qualification of financial managers, their experience in the field of risk management and other factors.