Q:

Why is risk assessment so important?

A:

Quick Answer

Risk assessment in finance is important because it helps the business find any possible negative results that impact the company if it takes on an investment; the business can use the findings from the assessment to make safer decisions and mitigate the risk. Without assessing risks, a company might take on an investment that does not yield a sufficient return and could incur a loss.

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Full Answer

Companies can assess both internal and external risks. For example, a company may do an internal audit of its own accounting practices, or management may consider the risk of inflation when considering doing operation in another country. Some other financial risks may include credit risk, foreign exchange rates, liquidity and price variation.

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