Business Risk Definitions

A business risk can be defined as ' the threat that an event or action will adversely affect an organisation's ability to achieve its business and strategic objectives' (Source: Audit Commission (2001) Worth the Risk, Improving Risk Management in Local Government).There are a number of definitions for the different types of risk that an organisation faces - these have predominately been refined and reinforced by the Basel Committee of Banking Supervision and the Financial Services Authority, the UK Financial Services regulator.

Market Risk

"...the risk that arises from fluctuation in the values of, or income from, assets"

Group Risk

"...the potential impact of risks arising in the parts of a firms group as well as those resulting from its own activities"

Credit Risk

"...occurs whenever a firm is exposed to loss if another party fails to perform its obligations"

Operational Risk

"...the risk of loss, resulting from inadequate or failed internal processes, people or systems, or from external events"

Liquidity Risk

"...the risk that a firm does not maintain sufficient financial resources to meet its liabilities as they fall due"

Reputational Risk

"...the risk that arises as a result of negative publicity having a detrimental effect on shareholder value and position in its market place "