Bankers talk about, and write about, risk. One of the most influential journals is the Risk Management Association Journal.
Here is a concise definition from an April 2007 article on “What We Know, Don’t Know and Can’t Know About Bank Risk: A View form the Trenches” written by Til Schuermann and Andrew Kuritzkes.
- Market risk, or the earnings impact associated with adverse price movements in the bank’s principal trading positions;
- Credit risk, or the potential for losses due to the failure to pay of credit counterparties;
- Structural Asset/liability risk, or the earnings impact from shifts in interest rates on the bank’s asset and liability positions;
- Operational risk, or (BCBS 2005, §644) “the risk of loss resulting from inadequate or failed internal processes, people, and systems, or from external events”; and
- Business risk, or the potential for losses from residual sources of non-financial earnings volatility.
They categorize the first three as financial risks and the last two as non-financial risks.
The entire paper is 58 pages long. If you are new to banking and want to do some self-study, it will expand your thinking beyond the transactional level of credit risk.