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Assignment #2

This document discusses risks in the context of Pakistan's international finance. It defines risk according to five authors and identifies the main types of risk in Pakistan as market risk, interest rate risk, inflation risk, currency risk, and liquidity risk. It then discusses flood risk in Pakistan, noting the average annual loss from floods is $1.5 billion primarily in Punjab and Sindh provinces due to the Indus River. The document also discusses climate change and natural hazard risk in Pakistan, its high social vulnerability, and how climate change impacts natural resources and economic sectors in the country.

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Ahmad Ullah Khan
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7 views

Assignment #2

This document discusses risks in the context of Pakistan's international finance. It defines risk according to five authors and identifies the main types of risk in Pakistan as market risk, interest rate risk, inflation risk, currency risk, and liquidity risk. It then discusses flood risk in Pakistan, noting the average annual loss from floods is $1.5 billion primarily in Punjab and Sindh provinces due to the Indus River. The document also discusses climate change and natural hazard risk in Pakistan, its high social vulnerability, and how climate change impacts natural resources and economic sectors in the country.

Uploaded by

Ahmad Ullah Khan
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Assignment #2

International Finance
Submit to: Ms. Tahira Kanwal
Submit by: Shahzaib Arif 19-Arid-2741

Definition of the risk (at least 5 definitions by different authors')

 According to J.J Hampton, “Risk can be defined as the possibility that the actual return from an
investment is less than the expected return.”
 J.C Van Horne defines, “Risk is the variability of potential returns of a project.”
 Weston & Brigham define, “Risk is the chance that some unfavorable event will occur.”
 According to Lawrence, 1976, “Risk is the measure of probability and the weight of undesired
consequences.”
 According to Risk Management Vocabulary ISO 2002, “Risk is a combination of the probability
and scope of the consequences.”

Type of Risk in The Context of Pakistan


Market Risk
The price of and income generated by the securities held by mutual funds may decline in response to certain
event, including those directly involving the companies whose securities are owned by the funds, general
economic and market conditions, regional global economic instability, or currency and interest rate
fluctuation.
Interest rate Risk
The risk that an investment's value will change due to a change in the absolute level of interest rates.
Usually, a rise in the interest rate during the investment period may result in a reduced price of the held
securities.
Inflation Risk
The risk that the cash flow from an investment won't be worth as much in the future because of changes in
purchasing power due to inflation.
Currency Risk
A form of risk that arises from the change in the price of one currency against another. It is the potential risk
of loss from fluctuating foreign exchange rates when an investor has exposure to foreign currency or foreign
currency trade investments.
Liquidity Risk
The risk stemming from the lack of marketability of an investment that cannot be quickly bought or sold to
convert into cash without loss.
Flood Risk
Average annual loss (AAL) from floods in Pakistan is estimated at almost $1.5 billion, which is the highest
annual loss from flood across all CAREC countries. In total, around 93% of the average annual damage from
floods occurs in Punjab and Sindh provinces, where damage totals $938 million and $456 million per
annum, respectively. Flood risk is associated with the Indus River which flows northeast to southwest
through Punjab, where it is joined by the Jhelum, Chenab, Ravi and Sutlej Rivers. These rivers drain the
high mountains of northern Pakistan and flow through populated cities in Punjab. These rivers then merge
with the Indus River which flows through the Sindh province and into the Arabian Sea.
Climate Change and Natural Hazard Risk
Pakistan faces some of the highest disaster risk levels in the world, ranked 18 out of 191 countries by the
2020 Inform Risk Index. This risk ranking is driven particularly by the nation’s exposure to earthquakes and
the risks of internal conflict. However, Pakistan also has high exposure to flooding (ranked jointly 8th),
including, riverine, flash, and coastal, as well as some exposure to tropical cyclones and their associated
hazards (ranked jointly 40th) and drought (ranked jointly 43rd). Disaster risk in Pakistan is also driven by its
social vulnerability. Pakistan’s vulnerability ranking (37th) is driven by its high rates of multidimensional
poverty. Pakistan scores slightly better in terms of its coping capacity (ranked 59th). The section which
follows analyses climate change influences on the exposure component of risk in Pakistan.
Climate Change impacts on natural Resource
 Heat wave
 coastal zone
 Land and soil
Climate Change impacts on Economic Sectors
 Agriculture
 Urban and Energy

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