Financial Risk Law and Legal Definition

All investment aims at low amount of risk earning more return. Uncertainty associated with financing is known as financial risk. It is an unfavorable condition in which actual return will be less than expected return. Three types of financial risks are:

  • Capital risk;
  • Currency risk and
  • Liquidity risk.
  • Risk of loss of capital is evident in all type of investment. When investment assets are held in another currency, risk involved is the movement affecting value of currency. For sale of commercial properties risk involved is liquidity risk.