Banking Exam Question - What are the NRB Directives About Risk & Risk Management? Explain

Introduction - Types of Business Risk
Liquidity Risk: 
Liquidity risk is the risk that a company or bank may be unable to meet short term financial demands. This usually occurs due to the inability to convert a security or hard asset to cash without a loss of capital and/or income in the process.

Interest rate risk:
Interest rate risk is the risk that arises for bond owners from fluctuating interest rates. How much interest rate risk a bond has depends on how sensitive its price is to interest rate changes in the market.

Foreign Exchange Risk:
Foreign exchange risk (also known as FX risk,exchange rate risk or currency risk) is a financial risk that exists when a financial transaction is denominated in a currency other than that of the base currency of the company.

Loan & Investment Risk:
Financial risk is any of various types of risk associated with financing, including financial transactions that include company loans in risk of default.

Operational Risk:
Operational risk is the risk of a change in value caused by the fact that actual losses, incurred for inadequate or failed internal processes, people and systems, or from external events, differ from the expected losses.