We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Is Issuer Risk?

Mary McMahon
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Issuer risk refers to the chance that the issuer of a security will default. Investors holding these securities would take a loss, which might vary in size depending on how much they paid and the market conditions. Before purchases, investors may conduct careful research to determine the level of risk involved so they can make informed decisions about how to proceed. Analysts and advisers can also offer assistance with selecting the best investment products for given situations.

A number of tools can be used to estimate issuer risk. Once is the balance of debt and equity. A firm with heavy debts and limited equity is at increased risk of defaults, because it needs to spend money servicing that debt and may be in trouble in the event of an emergency. Creditors could call on that debt, triggering a default because the company wouldn’t be able to access enough capital to make good on the obligation.

High equity, especially in the form of liquid assets, indicates that companies are prepared to handle debts and emergencies. The issuer risk is lower, because default is less likely in these situations. These companies may have large obligations, such as substantial contracts with vendors, but these are balanced out by the equity. Mixes of debt to equity can vary, and the economy may dictate the best blend; in a poor economy, high debt can be a cause for concern because creditors may call it in to provide capital for their own operations.

Overall outlook for a business can be another factor. A growing company introducing new, innovative projects and attracting public attention may have a low issuer risk because it is positioned to do well. This can be especially true of companies in emerging sectors of the economy that are creating a foothold for themselves. Aging companies with less flexibility that are struggling to remain relevant can be riskier investments. They may be less capable of adapting to changing market conditions and could suffer with economic trends.

Sources for information people can use to determine issuer risk can be varied. Annual reports can be useful, as can ratings from credit agencies which provide data on the short and long term outlook for various companies. Reviews in investment publications can provide interesting insights into various firms, as can coverage in the mainstream media. Forecasting in business can be a complex activity that is not always perfectly accurate, but combining information from numerous sources can increase the chances of identifying potential risk factors.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments
Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.