Financial markets have for a while now been a forum where buyers and sellers of financial assets and instruments meet and transact. Because of the uncertain nature of these markets, businesses are exposed to financial risks. To ensure survival in the competitive global market, businesses have to come up with strategies to manage financial risk and other business risks. .
Keywords: financial markets, risk, financial risk, business risk.
Financial and business risks are umbrella terms referring to the likelihood of organizations realizing reduced earnings due to uncertainties in their financial or business operations (Batten & Fetherston, 2002).These risks are inherent to all organizations with those having global operations being more exposed. The magnitude and effect of these risks depend on the nature of their volatilities and, in recent times, few business sectors have experienced more dynamic fluctuations than the financial markets. The recent global financial crisis gives a good indication of the nature of uncertainties in financial markets. In the run-up to the crisis, the financial markets accrued significant profits for many businesses but with this came substantial risk (Mercereau, 2006). Subsequently, the risks exposure became too large to evade and the markets experienced a considerable slump. To avoid recurrence of such situations: businesses, scholars, and governments have invested substantial time and resources in finding ways of measuring and managing business and financial risk. This paper hopes to accomplish three things: explain the key financial and business risks, identify how businesses measure these risks and what global options are available in financial risk management. .
In buying and selling of all freely-traded currencies in the financial markets, there are infinite fluxes in their exchange rates. As such unexpected exchange rates fluctuations could have a significant effect on the value of the organization (Hampton, 2011).