August 2018 – Page 2 – Korsell Corporate Consult

A Thing or Two About Network Marketing

August 15, 2018 Published by kccadmin

We’ve all heard the far-reaching claims many of the network marketing “gurus” from companies like Herbalife, Nu Skin, Avon and others have made—largely about earning potential—over the years.

“Become a Millionaire!”

“Make Money 24 Hours a Day”

“Instant Success!”

The headlines are certainly enticing, but does network marketing really work? And if so, for whom & for how long? Well, it turns out the answer to these questions aren’t so black and white, and they’re questions that needs to be answered on a case-by-case basis around your own unique situations.

The idea of making money right away without any special skills or major investment appeals to the immediate need, while the promise of residual income appeals to the desire to not end up in your current financial position ever again. And some highly reputable companies have been built on this marketing & distribution structure… Avon, Mary Kay, Excel Communications, and more. But then there’s the downside… “Do I really want to pitch this to all my friends?” “Can I actually make money at it?” “How do I know it’s not a scam?”

If you’re considering an MLM, CDM, or network marketing opportunity, ask these six questions to determine whether a network marketing, multi-level, or consumer direct marketing opportunity is worth your while (and your money).

Who is your upline?

Take it all the way to the top. What do you know about the person who introduced you to the opportunity? Can you trust what they tell you? Are they willing to divulge exactly how much they’ve been making? And what about the founders of the company (assuming it’s a newer company)? Have they been successful and reputable in their previous businesses? Investigate your entire upline just like you would a business partner you’d never met before.

What is the product?

Is it something that would sell well in a retail store or via other traditional marketing and distribution channels? What’s the competition like? How convincing are you going to have to be in order to sign up customers? If you’re not an experienced salesperson, don’t expect to become one overnight. You’re going to have to become an evangelist for the product, so make sure you believe in it.

When will you start actually making money?

Don’t fall for the line that it takes months or even years to show a profit. You should be able to recoup any investment and start earning income within just a few weeks if there’s really demand for the product. Making a living at it is another story. You need to be able to work it part-time in addition to other steadier income sources. Will you realistically be able to do that with this company?

Where is the product being promoted and where can you promote it?

Is the company doing advertising and publicity of its own to help create demand for the product? And what restrictions are there on where and how you can promote it (advertising, websites, etc.). There’s not a right or wrong answer to that question – a wide open policy is more flexible for you, but for everyone else, too. If you’re prepared to be highly competitive, that’s fine, but if not, you may prefer to work with a company whose policy is more restrictive.

How were you recruited?

Were you recruited primarily as a customer, with just a mention of “income opportunity”, or was the primary pitch about the business opportunity? The ethical way to build a downline is to sign people up as customers first, and then if they like the product, they’ll be drawn to become a rep. A hard-sell on signing up as a rep right at the outset should send up a red flag for you.

Why are you doing this?

This is perhaps the most important question of all. If you’re doing it because you think it’s going to help you out of a cash crunch, forget it. If you’re doing it because you think you’re going to be rich in a year, well, it’s fine to have a vision but don’t bank on it. On the other hand, if you really believe in the product, that gives you the best likelihood of success with it.

There are no absolute right and wrong answers to these questions. The point is to make sure that you’re going into it with your eyes wide open, as some network marketing companies have indeed turned out to be scams at the end of the day.

That being said, many people have made a lot of money in network marketing, MLM, and consumer direct marketing, but many more have ended up wasting a whole lot of time and money chasing a pipe dream.

Ensure your success by being sure you’re getting into the right opportunity in the first place.

Source: https://www.thebalancesmb.com/too-good-to-be-true-1200533

Understanding Business Insurance

August 13, 2018 Published by kccadmin

Business insurance coverage protects businesses from losses due to events that may occur during the normal course of business. There are many types of insurance for businesses including coverage for property damage, legal liability and employee-related risks. Companies evaluate their insurance needs based on potential risks, which can vary depending on the type of environment in which the company operates.

BREAKING DOWN ‘Business Insurance’

It is especially important for small business owners to carefully consider and evaluate their business insurance needs because they may have more personal financial exposure in the event of loss. If a business owner does not feel he or she has the ability to effectively assess business risk and the need for coverage, they should work with a reputable, experienced and licensed insurance broker.

Several types of business insurance that small business owners might consider:

Professional Liability Insurance

Professional liability insurance insures against negligence claims that result from mistakes or failure to perform. There is no one-size-fits-all professional liability coverage. Each industry has its own unique concerns that should be addressed.

Property Insurance

Property insurance covers equipment, signage, inventory and furniture in the event of a fire, storm or theft. However, it doesn’t cover mass-destruction events like floods and earthquakes. If your area is at risk for these issues, you’ll need a separate policy.

Home-Based Businesses

Homeowner’s policies don’t cover home-based businesses like commercial property insurance covers businesses. If you’re operating a home-based business, inquire about additional coverage for equipment and inventory.

Product Liability Insurance

If your business manufactures products to sell, product liability insurance is very important. Any business can find itself named in a lawsuit due to damages caused by its products. Product liability insurance protects a business in such cases.

Vehicle insurance

Any vehicles used for business should be fully insured. At the very least, businesses should insure against third-party injury, but comprehensive insurance will cover the vehicle in an accident, as well. If employees are using their own cars for business, their own personal insurance will cover them in the event of an accident. One major exception is if a person is delivering goods or services for a fee, including delivery personnel.

Business interruption insurance

This type of insurance is especially applicable to companies that require a physical location to do business, such as retail stores. Business interruption insurance compensates a business for its lost income during events that cause a disruption to the normal course of business.

Source: https://www.investopedia.com/terms/b/business-insurance.asp

Tips For Suppliers Dealing With Retailers

August 10, 2018 Published by kccadmin

Retail businesses are all about working their cash, keeping their customers and getting the most out of their suppliers. To do this, they will take the largest possible profit margin from the product, while doing as little work as possible. A retailer is a bit like having a salesman who demands the highest bonuses and the fanciest car, and doesn’t want to work too hard for it.

However, there are six key ways that suppliers can make sure they get the most out of their retail partners.

Returns

Make sure that you get an agreement on returns. Most retailers return any products that they cannot sell or that have been returned by the customers. This is difficult to protect yourself from, but if you are using a wholesaler they may be able to handle the returns for a small margin increase. This also means that they do everything in their power to reduce the number of returns. Argos has been known to send back 30% of some product lines.

Wholesaler margins

Some wholesalers will work for less than 1% margin, but if you’re asking the wholesaler to act as a distributor and actively sell the product, you could pay between 10% and 15% – on top of margins of 30% to 40% for the retailer. Make sure that the overall amount you’re having to pay in margins works for you.

Detail

Make sure that you’re involved with the marketing material (catalogue pages, web content, staff training) and point of sale (POS) materials relating to your product. You can insist on this if you give the impression that you will not support any misrepresentation of your product to consumers.

When you check the material, make sure that it includes your top Unique Selling Propositions (USPs) and that they haven’t just used some nonsense tech specs (which they tend to do). As someone once said, “retail is detail”.

Store staff

See what you can do to help store staff to understand and sell the product. You may be able to arrange some training, or supply literature.

You may also be able to run a competition or offer incentives for staff to increase sales of your product. Some retailers can organise spifs (sales incentives to individual store staff members), but this tends to be expensive and bureaucratic, so running your own programme may be preferable.

Staff discounts can work when it comes to getting staff to use and love your product, so that they become effective advocates. But be aware that some retailers will ask for a price where they still make their full margin.

Advertising

If a retailer wants you to contribute towards advertising, check the rates – retailers get the best deals, and they may try to make margin by getting you to pay extra. If you think that’s happening, place the advertising yourself.

Pricing

Encourage the retailer not to reduce the price unless they have an exclusive product, as this can lead to price wars across retailers and an overall lower income from your product. It is, of course, illegal for you to enforce this, but if they want to lower the price as a temporary promotion, they should take it from their own margin. When retailers ask for a lower cost price, it’s often an indication that they want to lower the street price permanently – even if they say it’s because they need extra margin.

Source: https://www.marketingdonut.co.uk/marketing-strategy/retail/six-tips-for-suppliers-dealing-with-retailers

Considering Relocation? Read This!!!

August 9, 2018 (updated August 9, 2018) Published by kccadmin

Every year, the grass on the other side of the fence looks greener to many entrepreneurs, and a change of place looks like the most promising path to growth. So they pull up stakes and move to a new place, where they hope to find better odds for business success than they had in their previous location. They’re in good company. Although no one keeps a count of business moves, given the multitude of valid business reasons for making a move, almost any entrepreneur will, at some time, consider relocating as a way to expand.

Why Location Matters
Businesses commonly cite five main reasons for moving, according to Sharon K. Ward, an economic development consultant in Allentown, Pennsylvania. These are labor and work force issues, the desire to reach new markets, the need to upgrade facilities or equipment, the desire to lower costs or increase cash flow, and considerations about quality of life. For different businesses and at different times, certain concerns are more important than others, Ward notes. But just about all moves can be attributed to some combination of these issues.

Chief among current reasons for relocation is the need for a suitable work force. You may have a shortage of qualified workers for some occupations, especially those requiring technical expertise. For firms that need specialized employees, it may be well worth it to relocate to an area where you can easily find these kinds of employees.

When a company finds itself in outmoded or undersized facilities, that’s another reason to look at moving. Most businesses start in a small facility, such as the founder’s garage, and then move to bigger quarters in the same city. Later, the business outgrows that location or begins to find fault with its facilities, services, utilities, infrastructure or other features.

Cost Issues

Cost is a concern in any business decision, and a move can cure–or create–many cost issues. For starters, the cost of living varies widely among cities

But costs involve more than living expenses, and differences in geographic costs have leveled out in recent years. Companies often find themselves forced to compromise between staying close to target markets and choosing the lowest-cost facility.

Quality of Life

An even more intangible issue is quality of life. Companies evaluating relocation often look at recreational opportunities, education facilities, crime rates, health care, climate and other factors when evaluating a city’s quality of life. That’s another reason deteriorating inner cities are losing businesses, as companies seek an improved quality of life elsewhere.

Relocation Results

While moving carries risks, a move can be one of the best things you ever do for your business. When you move or expand to a new location, the odds are stacked in your favor, who has overseen the selection of new sites for thousands of retail establishments.

But there are no guarantees in relocation, and as many things can go wrong with a move as can go right. They include rushing the decision, focusing too narrowly on a few costs, failing to use available economic development services, ignoring quality-of-life factors, missing important environmental or regulatory concerns, and, believe it or not, failing to plan for future expansion. These mistakes can be boiled down to hurrying too much and trying to do a move too cheaply.

Part of the problem is the complexity of these two issues. There’s no set time for how long it should take to move, Ward says, and sometimes you don’t have a choice. “I’ve worked with companies that made a decision in three or four months because they didn’t have a choice,” she says. Others might expend two or three years in the process, with no better results.

Source: https://www.entrepreneur.com/article/81406

Why You Should Invest In People, Not Companies

August 8, 2018 Published by kccadmin

Unless you’ve been living under a rock, you’ve probably heard about the entrepreneur who famously got a $2 million investment after showing a presentation about nothing. Now, the same entrepreneur, Itay Adam, has created a new model for investors that builds on the ideas he used to secure funding. The gist of it is to invest in a team — not a product.

It’s a well-known practice that if you invest in a talented team and give them the freedom to create, they will be able to test, experiment and build something successful. However, Adam’s theory leverages another concept. By investing in a team and giving them the freedom to experiment with multiple concepts for a company, instead of focusing on just one, you can hedge your bets and spread the risk beyond one make-or-break idea.

Adam calls this model the StartLab.

The StartLab model focuses on angels and VCs investing in key teams of creative entrepreneurs that have the capability to produce multiple ideas for a company. To understand the benefits of investing in people over companies, you need to first understand the core components of the StartLab model:

Test to Cater vs. Test to Build: “Test to Cater” teams will take multiple ideas and test them out before building a team to support one winning idea. “Test to Build” will produce a more detailed working pilot of an idea and look to grow it into a successful company.

The Team: There are three core members of a StartLab: a full stack developer capable of building products out across platforms, a designer to create and put all the pieces together, and a director to guide and lead the entire project.

Source: https://www.forbes.com/sites/ilyapozin/2015/10/08/4-reasons-to-invest-in-people-not-companies/#4fb8dfbc47cb

THREE STEPS TO SELLING YOUR IDEA

August 7, 2018 (updated August 7, 2018) Published by kccadmin

Perhaps you’ve got a keen mind for inventing–but not much of a head for business. Or maybe you’re good at both, but you’d rather focus your time on developing ideas rather than launching a full-scale business. Fortunately, there’s an option that suits your needs perfectly: licensing your invention idea. Licensing is simply the process of selling your idea to a company that’ll develop it fully, taking on all the business-related tasks that launching a new product involves. Licensing can also be a great option for those whose financial resources are very limited.

Just as there are steps to starting your own business, there’s a smart way to approach licensing your invention. I break it down here into three main steps.

Step 1: Gather Information
Yes, it’s the information age–which means the more info you’re armed with, the better off you’ll be. Licensing your idea is no exception. Before you even consider approaching prospective companies to sell your idea, be sure you’re clear in the following areas:

Know your market. This means gathering as much feedback as possible on your own invention idea. Focus group testing, even among friends and family, is one good way. You should also compile data on similar and competing products–info on what’s out there, what’s selling and who’s producing it, for example.
Do some legal legwork. Go as far as you can to determine if your invention is patentable or if it can be produced without infringement on other filed patents. A preliminary patent search on www.ustpo.gov will get you on your way. Also, the more information you can gather about regulatory issues or necessary legal steps, the better.
Look into production. Learning about the production process can be extremely helpful, particularly if your invention calls for unique materials or unusual manufacturing techniques.

Step 2: Prepare a Professional Presentation
After you’ve gathered all the relevant information, you’ll need to present it to potential licensors. Along with your most effective tool–a three-dimensional prototype model–you should develop a simple sell sheet to convey all the information you’ve gathered.

Your sell sheet should be a one- or two-page document that clearly states the following:

The problem, challenge or need the product meets
The product’s features and benefits
Your product’s market
The legal status of your invention (ie: patent pending, copyright or trademark info)

You should also develop an introductory letter to accompany your sell sheet, which introduces yourself, explains why you’re contacting the licensee, and sets a time when you plan to follow up.

Step 3: Pinpoint Your Targets
You’ve gathered and prepared your information. Now what? Your next step is to determine the most appropriate contacts for this awesome new business opportunity. As a first step, I recommend you create a list of at least 50 prospective targets. As with any type of sales, the more prospects, the better. It’s a numbers game, and most companies will turn you down for one reason or another. Also note that a more focused list will bring you more effective results.

So how can you identify companies that might make a good fit? If it’s a consumer item, it’s as simple as a shopping trip around town. Go to a store where you’d expect to see your product sold and jot down the names of manufacturers who produce similar products. You may also be familiar with many of these companies from your prior market research.

Another way to identify prospective manufacturers is to identify the trade association that serves the industry in which your product will fall. Visit their websites and look for member lists. Some trade associations list the manufacturers scheduled to exhibit at their upcoming trade shows.

Online databases can also be a great resource. Local public business libraries are often linked to database systems that allow you to search for companies in specific industries. And, from your own computer, you can visit www.hoovers.com , a great online database that provides information about many large-sized companies. The site even enables you to find companies that have specific key words in their description.

Step 4: Qualify Your Targets
Once you’ve generated your list of 50 or so companies, you’ll want to prioritize them–or “qualify” them based on which will make a best fit with you and your product. There are a number of factors to consider when qualifying prospective licensees:

Size. Large companies are easy to identify and generally have terrific distribution. However, small companies might stand to benefit more from your invention–and often make better prospects. Small companies generally have less “in house” product development staff and are less burdened by red tape and multiple layers of bureaucracy, which can make them easier to deal with.
Geography. While you don’t need to limit yourself to local companies, they do offer advantages. Companies in close proximity allow you to leverage any contacts you might have locally, and set up face-to-face meetings (which is always valuable).
Similar product line. The closer your invention matches a company’s already existing product line (as long as it isn’t directly competing), the more sense it probably makes for them to take it on–especially if it gives them a product that competes with a rival company.
Access to a decision maker. The more easily you can identify and directly reach the decision maker, the more efficient your contact with a prospective licensor will be. (Note: if after several calls you can’t determine who the proper contact is–or get in touch with him/her–you’re better off focusing on other targets.)
Company policy. Some companies’ policies for accepting submissions are more inventor-friendly than others.
Manufacturer reputation. Find out the company’s track record for working with inventors, and if possible get personal references from those who’ve gone before you.

Step 5: Make the Sale
You’re now armed with information, presentation materials and a hot prospect list. How do you know you’re getting a good deal? Understand there are no set rules or terms when it comes to negotiating a licensing agreement. The perfect agreement is one that gives both you and the manufacturer exactly what you want. Therefore the terms are completely negotiable and can vary dramatically.

However, do keep the following points in mind as you’re negotiating your deal. First, set realistic expectations. In other words, don’t expect a million-dollar deal–it’s doubtful you’ll retire after licensing your first product. Second, go for the gusto. Most ideal for you, the inventor, is to get as much up-front cash, as high a royalty, and as high an annual minimum payment as possible. Of course, the manufacturer will be gunning for less risk–which means a lower up-front payout, lower minimum payment requirements, and as low a royalty percentage as possible. But what exactly do these terms mean, and how can you get the best deal for your invention idea?

Up-front payment. This is the money that the licensee pays the licensor up front, before development or sales even begin, for the assignment of the rights. This can be an outright payment, but most commonly takes the form of an advance against (future) royalties. The amount of up-front payment varies. However, it’s not unusual for an inventor to seek an up-front payment that covers the cost of her patent filing. Another way to come to an agreeable sum is to base your payment on projected sales expectations for the first year.
Royalties. These are the payments made to the licensor based on a percentage of the licensee’s product sales. So, if you make a 2% royalty, that means you’ll receive 2% of the wholesale price of each unit sold. The typical royalty range tends to run from 2% to 5%. Again, the further along or more proven the invention, the less risk for the manufacturer and the more likely you’ll get an up-front payment or higher royalties. From my perspective, the royalty is the most important element of the agreement, because if the market responds to the product, the manufacturer will do well and the inventor can earn a good revenue
Annual minimum. This is the contractual term that requires the licensee to pay the licensor a minimum amount of royalties, irrespective of the actual royalties due from sales. To me, the purpose of annual minimums is to ensure that the manufacturer places sufficient effort and resources behind promoting the product. Therefore, I believe that annual minimums are most important in the initial years of the agreement–when the product is being launched–to ensure that the licensee adequately prioritizes this item when deploying sales resources.
Exclusivity. Most manufacturers will want to have exclusive rights to distribute the product globally. However, this is subject to negotiation. Depending on each party’s motives, the agreement could actually divide up the markets in many ways.

It’s important to note that these four components are inter-related: meaning the more you get in one area, the more you might have to concede in another. As with any negotiation, both sides will likely make concessions. Decide which of these components will best meet your short- and long-term needs, and negotiate from there. There are numerous books that provide techniques in negotiation. The most salient tip I can offer is to use a “non adversarial” approach in which your goal is to create terms that are a win-win for both parties. Good luck!

Source: https://www.entrepreneur.com/article/83496

Why You Should Adopt a Culture of Optimization

August 3, 2018 Published by kccadmin

Every organization abides by a set of values and beliefs, which prompts the culture within the organization. This organizational culture can be seen as the way in which its members relate to each other, their work, and the outside world in comparison to other organizations.

An overwhelming 84% of participants in the Global Culture & Change Management Survey conducted by Strategy& said that culture is critically important to business success.

Great companies like Apple and Google have been known to benefit greatly by investing in their culture. On the other hand, companies like Blockbuster and JCPenney lost their focus on culture and paid a heavy price.

So what type of cultural values should an enterprise invest in to be successful?

What Type of Organizational Culture to Adopt?

Company owners and decision-makers should invest in a culture of innovation and optimization during their business lifecycle.

Innovation, as they say, is the hallmark of entrepreneurship. In the early stages of development of a company, creative ideas and innovation alone bestow promising results. After that stage is crossed and you find a product-market fit comes the need for optimization. This is because when a product is reaching maturity, it needs to sustain itself and still keep earning profits.

Why to Adopt a Culture of Optimization?

Optimization, by dictionary meaning, is “an act, process, or methodology of making something (as a design, system, or decision) as fully perfect, functional, or effective as possible.”

For a mature and well-run product organization, the concept of optimization should be applied to every business process to gain optimal benefits. Whether it is your team, funnel, or website that you’re optimizing, you can be sure of making a bigger bang for the buck.

For instance, by optimizing your website, you can get more conversions for the same number of visitors. By optimizing your team, you can grow manifold the productivity and output of the same team members, and so on.

A culture of optimization is geared toward incremental, consistent, and risk-free improvements coordinated across company’s platforms to meet executive targets.

Source: https://vwo.com/blog/how-should-enterprises-adopt-a-culture-of-optimization/

HOW TO WRITE A BUSINESS CODE OF ETHICS

August 2, 2018 Published by kccadmin

A code of ethics is a collection of principles and practices that a business believes in and aims to live by. A code of business ethics usually doesn’t stand alone, it works in conjunction with a company’s mission statement and more specific policies about conduct to give employees, partners, vendors, and outsiders an idea of what the company stands for and how it’s members should conduct themselves.

The key in distinguishing a code of ethics from these other documents is to hit the right level of specificity. It should address both the particular nuances of the company’s industry as well as its broader goals for social responsibility and should be concrete enough to serve as a guide for employees in a quandary without laying out rules for every situation that could arise.

Policies can include issues such as a company’s commitment to not work with vendors who use child labor or are environmentally harmful, not discriminating in their hiring, and not taking bribes.

How to Write a Code of Ethics for Business: Setting Priorities
The first step a company has to take in laying out a code of ethics is deciding what values are important to it and what lines it won’t cross. Clarifying these details can be especially helpful as the company grows. Having HR educate incoming employees about the code of ethics and the company’s culture is especially important in the age of increasingly rapid job turnover.

Getting Input
A common mistake that companies make when drafting a code of ethics is not to consult employees. Even if you think you’re in tune with the daily trials and tribulations of your staff, you should solicit broader participation in the crafting of the code. Employees need to have a say in it but they also need to know why the code is important and why it ultimately contains the tenets that it does.

Don’t Sweat the Small Stuff
Making sure your code of ethics is neither too vague, nor too specific can be a challenge, and a slip up can make employees resentful of the endeavor. Companies often begin by pouncing on these sorts of transgressions and that immediately creates a hostile atmosphere because people don’t want to let go of that. You have to work with them from the big perspective until they self-realize what they need to do regarding the more specific scenarios.

Putting Someone in Charge
Even if senior management and employees embrace a code of ethics, someone needs to be put in charge of applying and updating it. This person is typically known as an ethical officer or, in more intimidating terminology, a compliance officer. They need to be reliable, have a strong commitment to the company’s success, and good people skills. They also need to have access to senior management or the board of directors for periodic updates or in case a problem arises.

The role of ethical officer typically falls to somebody on the HR or sales team. This person is also in charge of the system for monitoring and reporting misconduct. Like the process for creating the code, this should be done anonymously as any whistleblower would likely be concerned about what rocking the boat would do to their career.

Some companies kick the tires of their adherence to the code of ethics by checking in with both managers and employees about it during performance reviews. It’s also crucial to make your code of ethics a dynamic thing that changes as your business changes.

Source: https://www.inc.com/guides/how-to-write-a-code-of-ethics.html

UNDERSTANDING FINANCIAL RISKS

August 1, 2018 Published by kccadmin

Financial risk is the possibility that shareholders or other financial stakeholders will lose money when they invest in a company that has debt if the company’s cash flow proves inadequate to meet its financial obligations. When a company uses debt financing, its creditors are repaid before shareholders if the company becomes insolvent.

Financial risk also refers to the possibility of a corporation or government defaulting on its bonds, which would cause those bondholders to lose money.

Financial risk is the type of specific risk that encompasses the many types of risks related to a company’s capital structure, financing and the finance industry. These include risks involving financial transactions, such as company loans and exposure to loan default. The term is typically used to reflect an investor’s uncertainty of collecting returns and the accompanying potential for monetary loss.

Investors can use a number of financial risk ratios to assess an investment’s prospects. For example, the debt-to-capital ratio measures the proportion of debt used given the total capital structure of the company. A high proportion of debt indicates a risky investment. Another ratio, the capital expenditure ratio, divides cash flow from operations by capital expenditures to see how much money a company will have left to keep the business running after it services its debt.

Types of Financial Risks

There are many types of financial risks. The most common ones include credit risk, liquidity risk, asset-backed risk, foreign investment risk, equity risk and currency risk.

Credit risk, also referred to as default risk, is the type of risk associated with people who borrow money and become unable to pay for the money they borrowed. As a result, they go into default. Investors affected by credit risk suffer from decreased income from loan payments, as well as lost principal and interest, or they deal with a rise in costs for collection.

Several types of financial risk are tied to market volatility. Liquidity risk involves securities and assets that cannot be purchased or sold quickly enough to cut losses in a volatile market. Equity risk covers the risk involved in the volatile price changes of shares of stock. Asset-backed risk is the risk that asset-backed securities may become volatile if the underlying securities also change in value. The risks under asset-backed risk include prepayment risk and interest rate risk, both of which may also accompany other types of risk.

Investors holding foreign currencies are exposed to currency risk because different factors, such as interest rate changes and monetary policy changes, can alter the value of the asset that investors are holding. Meanwhile, changes in prices because of market differences, political changes, natural calamities, diplomatic changes or economic conflicts may cause volatile foreign investment conditions that may expose businesses and individuals to foreign investment risk.

Source: https://www.investopedia.com/terms/f/financialrisk.asp

Month: August 2018

Types of Financial Risks