Analysis Of Different Risks Faced By Amazon Company

Companies face many types of risk including but not limited to the following:

Systematic Risk for Amazon is 1. 50. It is defined as the uncertainty inherent to the entire market or entire market segment. Also referred to as volatility, systematic risk consists of the day-to-day fluctuations in a stock's price.

Unsystematic Risk is the type of uncertainty that comes with the company or industry you invest in. Unsystematic risk can be reduced through diversification. Amazon takes unsystematic risks by diversely investing in a multitude of different companies.

Credit risk or default risk is most simply defined as the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms. Amazon’s current default risk is 2. 57.

Country Risk is a concern because political and economic unrest create volatility. In turn, investors demand higher returns as compensation for this added risk. Amazon has many assets in foreign countries and ships internationally, which is why this risk is so high at 6. 78.

Foreign exchange risk describes the risk that an investment’s value may change due to changes in the value of two different currencies. Amazon’s diverse portfolio means that it has a higher chance of foreign exchange risk.

Interest Rate Risk includes the rates on the bonds. The company’s bond are decently rated but not great so they interest rates are likewise the same.

Political Risk includes the risk of doing business in other countries and the politics involved. For example, if a war is taking place in a country how will that affect the shipment. Amazon has a relatively moderate risk.

Market Risk includes data breaches and security loss. Amazon has high shipping expenses since it ships internationally as well.

Liquidity Risk includes how quickly the company is able to turn their products into cash.

Operational Risk includes the high costs of operating the facilities and the drones. It also encompasses the general operations of the site as well as subsidiary companies and all transactions.

Legal Risk includes the carriers and the liability of insurance protection needed to cover costs.

Inflation Risk includes how much cash will be worth from an investment. Amazon has a low risk for inflation because the company has very diverse assets.

Reinvestment Risk includes how much the company should reinvest back into itself in order to turn a profit. Amazon has done a great job by reinvesting in other companies and creating subsidiaries, so there is not much risk.

Cyber Risk includes the many prime accounts involved in Amazon that have private information shared. If someone were to hack into the company and cause a data breach, it would be a huge liability.