Definition of 'Financial Risk'

The risk that a company will not have adequate cash flow to meet financial obligations. The chance that an investment's actual return will be different than expected. Risk includes the possibility of losing some or all of the original investment. High standard deviations indicates a high degree of risk. The Big Bird Group of companies now allocate large amounts of money and time in developing risk management strategies to help manage risks associated with their business and investment dealings. A key component of the risk management process is risk assessment, which involves the determination of the risks surrounding a business or investment.

Types of Risk
Unfortunately, the concept of risk is not a simple concept in finance. There are many different types of risk identified and some types are relatively more or relatively less important in different situations and applications. In some theoretical models of economic or financial processes, for example, some types of risks or even all risk may be entirely eliminated. For the practitioner operating in the real world, however, risk can never be entirely eliminated. It is ever-present and must be identified and dealt with. In the study of finance, there are a number of different types of risk the been identified. It is important to remember, however, that all types of risks exhibit the same positive risk-return relationship. The Big Bird Group of Companies is facing number of financial risks during their operations some of which are under below.

1. Credit Risk
The risk loss of principal or loss of a financial reward stemming from a borrower's failure to repay amount or otherwise meet a contractual obligation. Credit risk arises whenever a borrower is expecting to use future cash flows to pay a current debt. Investors are compensated for assuming credit risk by way of interest payments from the borrower or issuer of a debt obligation. The company sales their product and services 45% on credit basis approximately

Products& services The products that sale the company on credit basis 1. 2. 3. 4. 5. 6. 7. Day old Broiler Chick Market Chicken Poultry & Animal Feed Poultry Vaccines Poultry Equipments (Nests, Feeding System, Drinking System, cooling System, etc.) Eggs After services(Farm visits, treatments)

Overcome the Credit Risk We can reduce & overcome the credit risk through different ways. i. ii. Before consignment Make an agreement in written farm Received security against the consignment (in shape of Banking Instrument)

2. Foreign Exchange Risk

1. The risk of an investment's value changing due to changes in currency exchange rates. 2. The risk that an investor will have to close out a long or short position in a foreign currency at a loss due to an adverse movement in exchange rates. Also known as "currency risk" or "exchange-rate risk" This risk usually affects businesses that export and/or import, but it can also affect investors making international investments. For example, if money must be converted to another currency to make a certain investment, then any changes in the currency exchange rate will cause that investment's value to either decrease or increase when the investment is sold and converted back into the original currency. The company faces many types of foreign exchange risk some risk are as follows i. ii. Import of Machinery (Generators, Feeding System, Drinking System, Cooling System, etc.) Import of Raw Materials (soybean, vitamins, day old Hubbard Chick, Eggs, etc.)

Overcome the Foreign Exchange Risk i. ii. iii. Through Foreign Currency Account. 100% advance payment for future imports which may be after 6 month or one year. Through quick respond & efficient work

3. Liquidity Risk
i. ii. iii. The risk stemming from the lack of marketability of an investment that cannot be bought or sold quickly enough to prevent or minimize a loss. Liquidity risk is the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit). An asset cannot be sold due to lack of liquidity in the market - essentially a sub-set of market risk. This can be accounted for by:

The company faces many types of liquidity risk someone are below i. ii. iii. Poultry equipments (Nests, Feeding System, Drinking System, cooling System, etc.) Poultry houses Perishable goods (after two days we cannot sold the balance chicks)

Overcome the Liquidity Risk

i. ii. Assets should be leased from banks Should require efficient sale team

4. Inflation Risk (Purchasing Power Risk)

The uncertainty over the future real value (after inflation) of your investment. The loss of purchasing power due to the effects of inflation. When inflation is present, the currency loses its value due to the rising price level in the economy. The higher the inflation rate, the faster the money loses its value.

The Big Bird Group also facing Inflation Risk due to current situation of country some ones are below: i. Low demand of products and services ii. High exchange rates (impacts on import) iii. Increase the price of raw materials (soybean, vitamins, day old Hubbard Chicks or Eggs, etc.)

Overcome the Inflation Risk

Controlling Inflation forms a significant part of the economic activities of a nation. Inflation is an economic condition characterized by a general rise in the prices. Thus, controlling Inflation is important as unrestrained increase of the prices may culminate in Hyperinflation, and an excessive fall in the prices may lead to Deflation. Both the situations are not healthy and sound for the overall growth and development of a country's economy i. Fiscal Policies

Fiscal policies are effective in increasing the leakage rates from the circular income flow, thereby rejecting all further additions into this particular flow of income. This brings about a reduction in the Demand-Pull Inflation, in terms of increasing unemployment and slackening the economic growths. Following are a few types of fiscal policies commonly employed: i. ii. iii. Lowering the expenses on company level A fall in the borrowing amounts in the company sectors, on an annual basis High direct taxes, for reducing the disposable income

5. Market Risk
The risk incurred in trading assets and liabilities due to change in interest rates, exchange rate and other asset prices. Market risk arises when financial institutions actively trade assets and liabilities rather than holding then for longer term investment funding or hedging purposes. Market risk is closely related to interest rate and foreign exchange risk in that as these risks increase or decrease the overall risk of the financial institution is affected. In Big Bird Group the company face many types of market risk some are listed i. ii. iii. Perishable product ( chicks must be sold within 2 days the company cannot store or hold for long
time)

High fluctuation in Rate on daily basis Rumor (bird flue)

Overcome the Market Risk i. ii. iii. iv. By providing quality products & Effecient sale team. Creating company goodwill Introducing new market Expending business through lanching a new product

Technology risk The risk incurred by FIs when its technological investments do not produce anticipated cost savings

Another financial risk is the potential need to borrow additional funds. The rapidly changing technology of poultry production may result in growers being pressured to make relatively frequent equipment upgrades. Older equipment may be mechanically sound, but technologically obsolete. The tournament contract system makes it impractical to continue operation without maximum efficiency, so the obsolete equipment may need to be replaced and there is a very limited market for sale of the older equipment, even if it is mechanically sound.

Big Bird Group of companies makes heavy investments by adapting new technologies in their poultry operations likes. i. ii. iii. iv. Computerized cooling systems Computerized Environments control systems Computerized Feeding systems Computerized Drinking systems

How to overcome Technology risk i. Skilled worker.