Categories of risk - P1

Here are a list of risks that have not been asked or focused in P1 past exam.
1. Political risk - risk due to political instability and arises from the change of government or change in government policy.
2. Legal/litigation risk - risk that legal action being taken against an organisation.
3. Regulatory risk - risk of changes in regulation affecting the business.
4. Compliance risk - risk of non-compliance with the law resulting in fines/penalties, etc.
5. Product risk - risk of failure of new product launches/loss of interest in existing products.
6. Commodity price risk - risk of a rise in commodity prices (eg. oil).
7. Contractual inadequacy risk - risk that the terms of a contract do not fully cover a business against all potential outcomes.
8. Economic risk - risk that changes in the economy such as inflation, fiscal policy etc might affect the business.
9. Financial risk - risk of changes in level of distributable earnings as a result of the need to make interest payments on debt finance or prior charge capital.
10. Technology risk - risk that technology changes will occur that either present new opportunities to businesses, or on the downside make their existing processes obsolete or inefficient.
11. Fraud risk - vulnerability of an organisation to fraud.
12. Employee malfeasance risk - malfeasance means doing wrong or committing an offence. This is the risk of actions by employees that result in an offence or crime (other than fraud).
13. Credit risk - risk of non-payment by customers.

You will study many types of risks; those not listed here such as market risk (arising from product market, capital market and resource market), reputation risk, strategic risk and operational risk (both of these are part of business risk), environmental risk, entrepreneur risk and so on. It is not difficult to explain these risks because you will roughly understand it by just looking at the words and the above is to provide you the idea of how to get the meaning of the risk. Remember that risk can be either downside (threat) or upside (opportunity).