b.risk presetation
TRANSCRIPT
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SHAHEERA IMRAN (4088)
RUQAYYA NIAZI (4100)
WAJEEHA HAYAT(4066)
QAMAR-UN-NISA (3629)
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What Does Risk Mean?
The chance that an investment's actual return will be different than expected. Riskincludes the possibility of losing/gaining.
The probability that an actual return on an investment will be lower/higher thanthe expected return.
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Business Risk
Financial Risk
TYPES OF RISK
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BUSINESS RISK
Involves a company's strategic decisions other than finance.
Business risk measures the dangers of operational choices, suchas responses to competition from other firms or entering into a newproduct line or business sector.
Factors: Demand variability Sales price variability Input cost variability Ability to develop new products
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INTERNAL FACTORS OF BUSINESS
RISKS
The various internal factors giving rise to such risks are:-
Human factors
Technological factors
Physical factors
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EXTERNAL FACTORS OF BUSINESS
RISK
The various external factors which may give rise to such
risks are :-
Economic factors
Natural factors
Political factors
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BUSINESS RISK MANAGEMENT
Process that identifies loss exposures faced by an
organization & selects the most appropriate techniques
for treating such exposures.
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FINANCIAL RISK
Examines how a company's finances are structured
The additional risk placed on the common stockholders
as a result of the decision to finance with debt
Leverage increases shareholder risk
Leverage also increases the return on equity (to
compensate for the higher risk)
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FINANCIAL RISKS
Systematic risk
Unsystematic risk
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What Does Systematic Risk Mean?
The risk inherent to the entire market or entire marketsegment.
Also known as "un-diversifiable risk" or "market risk.
Interest rates, recession and wars all represent sourcesof systematic risk because they affect the entire marketand cannot be avoided through diversification. Whereasthis type of risk affects a broad range of
securities, unsystematic risk affects a very specific groupof securities or an individual security. Systematic risk canbe mitigated only by being hedged.
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What Does Unsystematic Risk Mean?
Company or industry specific risk that is inherent in each
investment. The amount of unsystematic risk can be reduced
through appropriate diversification.
Also known as "specific risk", "diversifiable risk" or "residual
risk".
For example, news that is specific to a small number of stocks,such as a sudden strike by the employees of a company you
have shares in, is considered to be unsystematic risk.