Frm study material kaplan12/13/2022 (1) the general perceived trustworthiness of an entity (i.e., that the entity is able and willing to meet its obligations to its creditors and counterparties) and (2) the general perception that the entity engages in fair dealing and conducts business in an ethical manner. Alternatively, it could be thought of from the perspective of an entity changing its business strategy compared to its competitors. Strategic risk can be thought of in the context of large new business investments, which carry a high degree of uncertainty as to ultimate success and profitability. Production and administration costs may also be uncertain. Revenues may be uncertain because of the uncertainty surrounding the demand for the products and/or the price that should be set. Regulatory risk could arise from changes in laws and regulations that are unfavorable to the entity (e.g., higher tax rates, higher compliance costs).īusiness risk revolves around uncertainty regarding the entity’s income statement. Legal risk could arise when one party sues the other party in an attempt to nullify or terminate the transaction. Operational risk considers a wide range of non-financial problems such as inadequate computer systems, insufficient internal controls, incompetent management, fraud, human error, and natural disasters. AnalystPrep’s Learn + Practice Package for the FRM Part I & Part II includes: FRM Parts I & II Video Lessons (93 hours worth of video lessons by Prof. Trading liquidity risk occurs when an entity is unable to buy or sell a security at the market price due to a temporary inability to find a counterparty to transact on the other side of the trade. Funding liquidity risk occurs when an entity is unable to pay down or refinance its debt, satisfy any cash obligations to counterparties, or fund any capital withdrawals. Liquidity risk is subdivided into two parts: For a majority of you, there are no shortcuts to learning the broad array of subject matter covered by the FRM curriculum, but this book should be a very valuable tool for learning and reviewing the material as you progress in your studies over the weeks leading up to exam day. It is easier to carry with you and will allow you to study these key concepts, definitions, and techniques over and over, which is a crucial part of mastering the material.
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