Assessment of Risk
Financial risk is a condition that arises as a result of changes, both internally and externally, that can be financially detrimental to a person, group, or company.
The losses caused by this financial risk can be very diverse. These include loss of assets, experiencing large amounts of losses, disrupted cash flow or cash flow, and others.
you know that a financial risk is a form of loss that has an impact on
finances, then let's understand the types of financial risks that exist.
general, financial risk is divided into two, namely systematic financial risk
and non-systematic financial risk.
is a financial risk that cannot be predicted or avoided due to several factors.
For example, a pandemic, political climate, and so on that result in inflation,
increased interest rates, and increased market volatility.
Is a financial risk that befalls a person, organization, or group due to an event. For example loss, illness, or death.
As a financial advisory firm we time to time do risk
profiling of clients to take care of systematic risk.
In this stage of the financial planning process, we reviews all of the data and
relevant documents, and, if necessary, requests from the client missing data
needed to develop the financial plan. Once all the information is available, we
analyze it to identify strengths and weaknesses in the client’s total financial
situation with respect to the achievement of stated goals. We might find some
areas that need immediate attention, such as the adequacy of the emergency fund
or the existence of risk exposures that are not adequately managed. Identifying
existing or potential problems that can negatively affect the client’s ability
to achieve objectives is an important part of financial planning.
The risk profiling questionnaire is meant
to measure the risk appetite as well as time horizon in investing. The
questionnaire is designed to show which type of investment approach may suit
the client. Each answer would be given a point. The total score would suggest
the appropriate risk profile for the client.
On the basis of risk category following
indicative asset allocation can be suggest to the clients:
Growth Asset (like Equity ) %
Defensive Asset (like Fixed Income) %