What is Risk?

(Company always prone to internal and external factors whether the company will
achieve or realize its objective. The corporation might face different uncertainties of
events or conditions and this uncertainty is what cannot be avoided at best risk can be
manage or mitigated. Need to be manage or mitigated the risk to protect the investor
and the corporation.)

Risk is Exposure to the possibility of loss, injury, or other adverse or unwelcome

circumstance; chance or situation involving such a possibility.
Risk is inherent in every business, organizations and entrepreneurship need to be
willing to take risk as without risk there can be no meaningful gain. Like stress one has
to live with risk and it cannot be avoided. At best risk can be managed or mitigated.
It a probability that some future event could adversely impact the organization. Risk
measured in terms of probability and impact.
Systematic Risk and Unsystematic Risk
Systematic Risk
 It is not fully uncontrollable by organization. (SR effects the entire industry
therefore it cannot be solved particular organization alone because what is being
affecting a particular organization is also affecting the entire organization in the
market)
 It is not entirely predictable. ( It is a external factor that the corporation has no
reach at all for example changes in taxation , the changes in taxation that could
bring
 It is usually of a macro nature.( Affects the entire industry, entire market whether
it is in effect of investment policy changes, foreign investment policy, change in
taxation or global security threats (systematic risk) ((external factor like changes
in taxation that could bring higher tax liabilities for a particular organization that
beyond the control a corporation because that control is under the government))

 It usually effects a large number of organizations operating under a similar

stream.(Example one line of industry in cotton industry or in the petroleum
industry so there are a change in an foreign investment policy in terms of
importing and exporting of petroleum products that could affect not just a single
organization but the entire organization operating in that industry)
It cannot fully assessed and anticipated in advance in terms of timing and gravity.
(Beyond control of every corporation and thus cannot mitigated to a large extent)
 The example of such type of risk is Interest Rate Risk, Market Risk, Purchasing
Power Risk.

Unsystematic Risk
 It usually controllable by an organization.
 It is reasonably predictable.
 It is normally micro in nature.
 If not managed it directly effects the individual organization first.
 It can usually assessed well in advance with reasonable effort and risk mitigation
can be planned with proper understanding and risk assessment techniques.
 The example of risk are Compliance Risk, Credit Risk, Operational Risk.
(example compliance risk obviously affects particular firm if an entity would not
comply a particular regulatory provision then there are adverse effect, it could
bring to the entity so how would the entity manage or control this compliance
risk? These why important to have Risk Management !!!!

Since the organization itself who could just save from this type of risk then
therefore they could also to be the one who could create activities or strategies
that could mitigate this compliance risk. To make sure that they complying every
regulation which there are under the must elect or appoint a compliance officer
that will make sure and oversee that all provisions of all government regulatory
agencies where this corporation is under really complied in that sense they might
they could actually mitigate or manage possible effect of their compliance risk.