The knowledge of the different financial risks to which your company is exposed are a fundamental part towards an efficient management of financial operations, seeking not only to generate profits but also to reduce losses that may affect the balance sheet of the company.

Financial risks refer to all the variables that may affect an investment such as changes within the sector or the common instability within the financial markets where it operates. These directly affect the balance sheet of the business, and consist of the following 3 elements:

Financial risks refer to all the variables that may affect an investment such as changes within the sector or the common instability within the financial markets where it operates. These directly affect the balance sheet of the business, and consist of the following 3 elements:

1) The cost and availability of capital within a company.
2) The solvency of working capital in a planned manner.
3) The feasibility of a company to resolve its capital insolvency.
Nowadays specialties have been developed that work in minimizing the impact towards companies, investments, international transactions among others. The proper management of the treasury and the credit analysis of your clients are a fundamental part for the stable growth in a company.
There are 4 types of financial risk to which companies are affected. These risks are:
Liquidity risk: Liquidity risk is associated with lack of working capital to make the purchase and marketing of products / services affecting the speed of business and a potential price variability buy / sell required. This directly affects the overall profit of the business, with the sale price being one of the most sensitive to this ratio.

- Credit risk : Refers to the fact that one of the parties within a credit contract does not make its payments within the time stipulated contractually. This contractual breach (such as delays in payments or total non-compliance of these).

Companies are highly exposed to this risk when they sell in installments. There are companies that have risk departments that evaluate their clients prior to the granting of credits or sale in installments.
- Market risk: It refers to the loss of value and / or increase in the cost of an asset or investment due to the fluctuation of its price in the market. This may be related to the exchange rate of the country, an increase in raw materials, interest rates among other variables.

This risk, when open to different local and international factors, requires an initial assessment by the companies on the possible factors that could have relevance in the actions of the company during a certain period (regularly quarterly) and an contingency plan before the appearance of these risks.
- Operational risk: Being the closest to the company, the operational risk refers to all human errors and erroneous processes carried out as well as systematic errors by both internal and outsourced processes.

This risk is transversal to any industry and product and nowadays companies constantly evaluate their processes, seeking to simplify them to avoid extensive workflows that result in costs and potential risks for the company. The correct simplification of processes is a key element for the reduction of this type of risk.

Author's Bio: 

Hi, I am Malik I am a passionate content writer with almost a decade of experience in this field. I specialize in writing news about different topics: be it science, technology, finance, health, insurance, entertainment, politics, sports, property, and everything under the sun! I also love to write articles and blogs in different niches as this allows me to learn new things. visit xitepod.com
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