Before investing, it is essential to identify potential risks. These risks, which may emanate from a variety of sources, include:
Natural Risk: This includes any type of natural phenomenon that directly affects a business establishment or industry, such as floods, storms, tornadoes, or disease pandemics.
Technology: Network or computer failures may halt production or company connectivity.
Market Risk: Market conditions may decrease investment value; this is primarily associated with stocks.
Interest Rate: Risk may be caused by changes in marketplace interest rates; this is most prevalent in the bond market.
Credit: Bond issuers may default on interest or principal payments.
Political: Economic crisis or social unrest may cause uncertainty about investing in a specific country or region's market.