List and define the different major categories of risk events.

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List and define the different major categories of risk events.


List and define the different major categories of risk events.

Explanation & AnswerSolution by a verified expert


Risk events are the uncertain events, which can not be forecasted and their occurrence might cause the firms to incur losses. Risk events are categorised into following categories:

Strategy and reputation: A company's strategic decisions can give rise to a lot of risks. Events like response to the competitor's move, entering a new market and so on are included in this category of risk events. Their outcome is dependent upon careful planning and synchronised actions
Control and compliance: These types of risk includes risk related to legal and regulatory requirements, implementation of new laws, accurate reporting, internal control systems. Breach of regulatory compliances and legal framework may give rise to several penalties for the business.
Hazards: Hazards category of risk events include all the man-made and natural disasters whose outcome can never be positive. For instance, terrorist activities, floods, earthquakes, fires and so on.
Human resource: A company's employees are a major determinant of a company's performance. Human resource related risk events include recruitment,  succession planning, employees physical and mental health, work life balance and so on.
Operations: A company's operations include a variety of activities, process and facilities. Operations related risk events may include equipment failure, change in customer's preferences, power failure and so on.
Technology: These risk events are more prevalent in today's world. These risk events relate to technology and related services. Events related to innovations, obsolete technology, cyber security and so on, are categorised in this category of risk events.
Financial management: This category of risks includes events which occur due fluctuations in the market. Some of the types of risk included under this category are:

Foreign exchange risks: This risk occurs when there are fluctuations is the foreign exchange risk.
Price level risks: This risk includes risks due to the fluctuations in the prices of inputs and finished products.
Interest rate risks: This risk includes risks related to fluctuations in the interest rates.

Verified Answer

There are seven major categories of risk events:-

Strategy and reputation: These risks arise due to the strategic decisions a company makes.
Control and compliance: These risk events arise due to legal requirements and regulatory compliance.
Hazards: These risks arise due to man-made or natural disasters.
Human resource: These risks are related to employees and other workforce.
Operations: These risks are related to business operations and equipment.
Technology: These risks are related to technology and its advancements.
Financial management: These risks are related to financial events that take place in the market such as interest rate fluctuations, foreign exchange fluctuations and so on.

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