Risks take many forms and they can be classified in various ways.  Some risks can be anticipated, while others a business has little control over. 

Risks can be classified into 5 types:

• Strategic – protection of intellectual property, loss of a major account, competitor coming into the market, pursuing or not pursuing a new opportunity
• Compliance – failure to comply with a regulation or standard, breach of contract, responding to the introduction of new legislation
• Financial – increase in interest rates, non-payment by a customer, foreign exchange movement, managing bad debts
• Operational – breakdown of major equipment causing production delays, data security, theft, fire, dealing with hazardous chemical or materials, key employee leaving
• Market or environmental – external risks that a company has little control over such as major storms or natural disasters, global financial crisis, changes in government legislation or policies.

Many risks fall into different types so there is not a hard and fast rule when classifying risks. For instance, a change in government legislation or polices could also impact on compliance. Or, movement in foreign exchange might hinder a company’s ability to sell internationally, thus impacting on its strategy.

Putting risks into different types can help with formulating a risk management plan.