Financial risk refers to the possibility of losing money or facing financial losses due to various factors. These factors can include market fluctuations, credit issues, or changes in interest rates. Individuals and businesses must assess these risks to make informed investment decisions and manage their finances effectively. There are several types of financial risk, including market risk, credit risk, and liquidity risk. Market risk arises from changes in the value of investments, while credit risk involves the potential for a borrower to default on a loan. Liquidity risk refers to the difficulty of converting assets into cash without significant loss in value.