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ABC Company Latisha Barker Carolyn Woods ACC 206:
Finance & Accounting
Pages 5 (1255 words)
Risk profile is the representation of a company’s overall exposure to specific risks or group of risks at a given point of time. A company’s desired and targeted risk profile depends on its corporate governance approach, overall strategic objectives
A company’s desired and targeted risk profile depends on its corporate governance approach, overall strategic objectives and risk appetite. I. Overall Risk Profile The two basic types of risks that the company ABC might face based on the current economic and industry issues are- Systematic Risks- It influences a large number of assets and protection against such risk is virtually impossible. Unsystematic Risks- It is sometimes referred to as “specific risks”. Diversification is the only way to prevent unsystematic risk. The other fundamental risks that the company might face are- Credit or Default Risk- It arises when a company will be unable to pay the contractual principle or interest on its debt obligations. Liquidity Risk- It arises when the liquid resources available to a company will be unable to pay the current dues. Interest Rate Risk- It arises when the value of an investment changes due to change in interest rates (Yusof, 2007, p.7). Political Risk- It represents financial risk, which arises when the government of a country changes its policies suddenly (Yusof, 2007, p.9). Market Risk- It arises as a result of day-to-day fluctuations in stock prices, so it is also referred as volatility. ...
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