Question: What Are Some Risks Associated With Financial Decisions?

What are the four types of risk mitigation?

The four types of risk mitigating strategies include risk avoidance, acceptance, transference and limitation..

What are the four main characteristics of useful financial goals?

An effective financial goal would always has these SMART characteristics; Specific, Measurable, Achievable, Rewarding and Time-bounded. This is to ensure that our goals are meaningful and get us closer to financial freedom. Good luck in your goal setting.

What are the five steps in the personal financial planning process?

5 steps to financial planning successStep 1 – Defining and agreeing your financial objectives and goals. … Step 2 – Gathering your financial and personal information. … Step 3 – Analysing your financial and personal information. … Step 4 – Development and presentation of the financial plan. … Step 5 – Implementation and review of the financial plan.

What two characteristics are key in reaching your goals?

Here are five qualities you need to reach your biggest goals:Be positive. I have always believed that everything starts with a positive mindset. … Be persistent. … Be patient. … Be resilient. … Be adaptable.

What is a risk category?

A risk category is a group of potential causes of risk. Categories allow you to group individual project risks for evaluating and responding to risks. Project managers often use a common set of project risk categories such as: Schedule. Cost.

What is an effective financial goal?

1. Only set goals you really want to accomplish. It’s up to you what you want your financial goals to be — but if you don’t really believe in them, you’re not likely to achieve them. … Take the time to really think about what matters most when it comes to your money, and pick a few key goals you want to work toward.

Why are career planning activities considered to be personal financial decisions?

Why are career planning activities considered to be personal financial decisions? The career selected is a key to financial well-being and personal satisfaction. … Identify the type of risk being described – Training for a career field with low potential demand in the future.

What are the 4 types of risk?

One approach for this is provided by separating financial risk into four broad categories: market risk, credit risk, liquidity risk, and operational risk.

What types of risks are commonly associated with personal financial decisions?

Common risks associated with financial decisions include inflation risk, interest – rate risk, economic risk, and personal risk (Exhibit 1 – 2, p. 6).

What are some financial decisions?

Here’s my list of the 10 most important choices you’ll ever make:How much you borrow for college. … What career you pursue. … How early in life you start saving — and how much you save each month.How big a house you buy relative to your income. … Whether you marry the right person. … How often you replace your car.More items…•

What are the 7 key components of financial planning?

The 7 Elements of a Financial PlanRetirement plans.Investment management.Social Security Planning.Risk Management.Tax Planning.Estate Planning.Cash flow and budgeting.

What are the elements of a good financial plan?

The main elements of a financial plan include a retirement strategy, a risk management plan, a long-term investment plan, a tax reduction strategy, and an estate plan.

How does risk affect a company’s financial decisions?

Business risk relates to whether a company can make enough in sales and revenue to cover its expenses and turn a profit. With financial risk, there is a concern that a company may default on its debt payments. With business risk, the concern is that the company will be unable to function as a profitable enterprise.

How does capital structure affect financial risk?

A company’s capital structure points out how its assets are financed. When a company finances its operations by opening up or increasing capital to an investor (preferred shares, common shares, or retained earnings), it avoids debt risk, thus reducing the potential that it will go bankrupt.

What are the 3 types of risk?

Risk and Types of Risks: There are different types of risks that a firm might face and needs to overcome. Widely, risks can be classified into three types: Business Risk, Non-Business Risk, and Financial Risk.

What are the main components of personal financial planning?

9 components of personal financeIncome. You can’t rightly think about how to handle your money if you don’t have any. … Taxes. Everything that you earn is going to be taxed, but you can be better prepared if you plan for it. … Insurance. … Debt. … Expenses. … Savings. … Retirement. … Investments.More items…•

What are examples of risks?

Examples of uncertainty-based risks include:damage by fire, flood or other natural disasters.unexpected financial loss due to an economic downturn, or bankruptcy of other businesses that owe you money.loss of important suppliers or customers.decrease in market share because new competitors or products enter the market.More items…•

How do you identify financial risks?

Identifying financial riskLiquidity risk. Liquidity risk is the risk that the entity will not have sufficient funds available to pay creditors and other debts. … Funding risk. … Interest rate risk. … Foreign exchange risk. … Commodity price risk. … Business or operating risk.