# Five financial corporate risks

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"You never go broke by making a profit"

![The five financial risks are:](https://i.imgur.com/SxwKsyy.png)

1. Business
2. Market
3. Credit
4. Liquidity
5. Counterparty

## Business

Buy low, sell high

- Business risks exist if you can't do that
- You can do this for a little while
- But eventually, this will kill a business
- You need a sustainable model

## Market

Threaten a company because financial markets move

- Interest rates
- Foreign exchange rates
- Currencies
- Commodity prices

## Credit

"It's not what you have, it's how much you can borrow that matters"

- Downgrade risk (downgrade in company's credit score)

## Liquidity

The potential risk that a company will go bankrupt because it lacks the cash to pay bills

- Can't pay financial obligations
- Need to be able to buy low to sell high
- Need to buy equipment
- Need to meet debt obligations
- You need cash on hand to maintain day-to-day, big investments cause risks here


## Counterparty

If another party is involved in a business deal, risk to them is risk to you

- If you buy from a vendor
- Sign a long-term contract
- Hedge with a contract
- 3rd party counterparty risk management is a counterparty risk
- Choose your business partners wisely