Within the unsystematic risk we can identify and classify Risk into the following groups:
- Default risk – it takes place when the contractor does not keep the terms of a contract of a certain transaction, instrument or order.
- Management risk – connected with mistakes in enterprises management or another subject which causes negative changes in a given institution.
- Business risk – it is a risk that is connected the failure to make the expected income, both from a financial instrument and business activity, which in the future can lead to changes in value.
- Financial risk – it occurs when a given subject uses external source of financing of its activity and in this case risk is strictly connected with ways of financing. The most important risk in this case is credit risk.
- Bankruptcy risk – it is strictly connected with breaching of contract and financial risk. An occurrence of two of above, or at least one can lead to bankruptcy of a given company.
- Liquidity risk — which is connected with possessing stocks, shares or instruments, on which there is a low demand which can in turn make it harder to sell the goods or instruments – meaning its liquidation.
- Holding period risk – it is a risk that is mainly connected with bonds and pre-mature sale of this instrument, before it matures or reaches its maximum value which influences the changes that is a result of pre-selling.
- Reinvestment risk – it takes place, when the sources gained from investment are reinvested with a different interest rate than the one gained from the previous instrument.
- Call risk can occur when a given financial instrument can be purchased on demand and unsatisfactory interest rate can make at least one side in a bad situation.
Fig. 2: The Main Division of Risk
Source: Waldemar Tarczyński, Zarządzanie ryzykiem.