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Credit Risk is the "probability" of a borrower's default and the subsequent "Loss given default" (LGD).
IAs such, it mainly deals with two main parties: "The Lender" and "The Borrower". You may wish to refer to the "Basle Committee on Bank Supervision" literature on the website of the Bank for international Settlements www.bis.org . Briefly, there are currently three accords that that committee has published as guidelines to the G20 country banks to adopt and deal with the main risks the bank (as a lender) may face and the extent of "Regulatory Capital" it should maintain. While Basle 1 & 2 mainly deal with there types of risk : Credit, Market and Operational. The latest accord Basle 3 recognizes another type of risk "Liquidity" and sets the rules of calculating the required "minimum" Capital to be maintained by banks as a buffer to face any potential materialization of one of the four risks.
Financial Risk, is a more wider concept and deals with any possible risk that might affect any business to meet its financial objectives and obligations. Hence, the variable elements included for any business depends on the type of risks the business might face and varies from one business to another. (e.g. a marine shipping agency may consider delays in deliveries due to weather conditions as a important element resulting in Financial risk and may opt to buy weather derivatives to mitigate the risk, while a port management company may consider labour strikes of a more critical element leading to a Financial Risk.
Credit risk is risk related to money lent. The borrower's ability to repay or service the debt is termed as Credit risk.
Financial Risk is a broad concept (it includes credit risk in one sense). Risk that is attached to funds - whether debt or equity or quasi debt or quasi equity - is known as Financial risk.
Credit risk is a part
Financial risk
Which covers all areas of the Financial Action
A credit risk is the risk of default on a debt that may arise from a borrower failing to make required payments. In the first resort, the risk is that of the lender and includes lost principal and interest, disruption to cash flows, and increased collection costs.
The possibility that shareholders will lose money when they invest in a company that has debt, if the company's cash flow proves inadequate to meet its financial obligations. When a company uses debt financing, its creditors will be repaid before its shareholders if the company becomes insolvent.
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