This article focuses only on the risks associated with a company’s financial investments. It does not address the risks of individuals.
Investing in financial markets as a business
The goal of a company investing in the markets is simple: to generate returns! It’s another way to make money. These new gains will help stabilize debt, boost the company’s cash flow, and strengthen its credibility with other players in its sector.
Be careful, however, investing always carries a risk: the risk major clinical outcomes included bleeding of losing money. This depends on many factors, including the company’s activity and the type of financial transactions carried out. Fortunately, companies that wish to make investments are subject to legal regulations.
A company investing in financial markets must therefore take risks into account to ensure excellent financial management . To limit risks, it is advisable to seek support from professionals, banks, or investment firms. Financial risk management is a profession in its own right!
Types of risks
Liquidity risk
Also known as “illiquidity discount,” liquidity risk refers to the fact of not being able to sell one’s assets . The risk is also having to sell them at a price much lower than their true value. This occurs when the company is unable to resell its inventory (high competition and/or no buyers).
Concentration risk
It appears if the company has similar assets and the price drops sharply . This is the case, for example, if the company invests half of its capital in a single type of asset, or if the assets have correlated prices… and these europe email prices drop at the same time! You then risk losing a significant proportion of your money.
Market risk
It is directly related to the uncertain evolution of the price of the asset that the company is purchasing. Market risk lies in buying in a “bear” market and selling in a “bull” market.
Exchange rate risk
This risk concerns companies that carry out operations in a foreign currency . Fluctuations in the value of this currency on the foreign exchange market can reduce the value of receivables (loss of value).