Risk Types

Risk types can broadly be categorized into;
a. Macro Risk Levels, and
b. Micro Risk Levels

Risk Types – Macro Level:

Systematic Risk

Systematic risk is the risk that cannot be reduced or predicted in any manner and it is almost impossible to predict or protect yourself against this type of risk. Examples of this type of risk include interest rate increases or government legislation changes. The smartest way to account for this risk, is to simply acknowledge that this type of risk will occur and plan for your business to be affected by it.

Unsystematic Risk

Unsystematic risk is risk that is specific to an assets features and can usually be eliminated through a process called diversification . Examples of this type of risk include employee strikes or management decision changes.

Risk Types – Micro Level:

  • Business / Income Risk
  • Liquidity Risk
  • Financial Risk
  • Exchange Rate Risk
  • Political / Country Risk
  • Market Risk / Portfolio Risk