Financial risk

Definition

Financial risk is the possibility of losing financial capital as a result of an investment's failure to yield expected returns or encountering unforeseen market conditions. It encompasses the potential for an investor or company to face losses instead of gains in their financial dealings.

Related terms

Market Risk: The possibility for investors to experience losses due to factors that affect the overall performance of the financial markets.

Credit Risk: The risk that a borrower will default on any type of debt by failing to make required payments.

Liquidity Risk: The risk that an asset cannot be sold on short notice without incurring a significant loss in value