Question

If your company is public, look at the Risk section in the 10K report - what does it say. If your company is not public, look for a public company that interests you and look for the Risk section in their 10K report - what are the most important risks that you can identify?

Answer 1

The important risks that I can identify are:

1. Interest rate risk - There is a possibility of Inflation increasing and the US Federal reserve increase the interest rate which results in a increase in the cost of capital

2. Exchange rate risk - The risk that can result in the foreign currency depreciating against the US dollar and the business as a whole realizing lower revenues and a lower bottom line

3. Political risk- Thus business being a multi-national has presence in many nations across the world including emerging nations. An unstable government in some countries could result in he net revenues taking a hit

4. Liquidity risk - With the interest rates rising, there could be tighter liquidity and flow of money will decrease resulting in liquidity risk and increased short term borrowing

5.Operational risk - The risk that the present systems in the business may be obsolete and can result in increased competition in the industry and thereby resulting in lower profits.