You now know that risk is inherent in business. Every company faces the task of managing the risks associated with its finances. Being able to effectively manage risk is a competitive advantage.

List of some of the types of risk your firm faces. What is the biggest one(s) it faces? How can your firm mitigate that risk?

For example, mismanaging of credit risk by banks was the beginning of the financial crisis in late 2000s. Mortgage companies made loans to people who may not have had the means to pay them back or who had a history of poor credit.

Those who lost their jobs during the recession were not able to make payments to the banks (lost deposits to the banks), and in turn, the banks were not able to pay back their own loans. Consequently, they suffered from another type of risk: liquidity risk.

Nowadays the banks tightened up their loan requirements, and it is a lot more difficult to obtain a mortgage loan.