International Journal of Economics and Financial Issues ISSN: 2146-4138 available at http: www.econjournals.com International Journal of Economics and Financial Issues, 2018, 8(2), 210-218. International Journal of Economics and Financial Issues | Vol 8 • Issue 2 • 2018 210 Risk Factors in Financial Services Industry: Application, Threats, Theoretical and Empirical Literature in Management of Risk Khaldoun M. Al-Qaisi 1 *, Rafat M. Al-Batayneh 2 1 Faculty of Business, Vice Dean of Academic Research and Graduate Studies, Amman Arab University, Amman, Jordan, 2 Faculty of Business, Finance Department, Amman Arab University, Jordan. *Email: khaldoun_21@yahoo.com ABSTRACT The purpose of this paper is to provide a critical study over enterprise risk management. For this, the paper has reviewed theoretical and empirical literature in management of risk. Theoretical literature depicts that no theory can explain about the risk management techniques alone. While empirical literature providesthe importance of enterprise risk management to be used in the organization for managing the risk, exist in portfolio structure of the organization. The paper besides that also provides theoretical and empirical literature and depicts about the effect on working of the organization by implementing the enterprise risk management. The paper has discussed many theories on the implications on organization. The paper briefy discusses about how the performance of organization structure, frm value, default risk perspective, and disclosure requirement would be affected due to implication of enterprise risk management model. The paper has discussed the importance of techniques like correlation, descriptive analysis and regression analysis. At last, the paper provides some recommendations, due to inconsistency in provided theories. For this, the paper considers present and future market conditions to lead to more development in enterprise risk management. Keywords: Risk, Risk Management, Risk Factors, Enterprise Risk Management JEL Classifcations: G00, G11, G311 1. INTRODUCTION Risk management involves fulfillment of following things: Measurement, identifcation and estimation of risk exposures. It helps in assessment of risk exposures. Risk management helps in fnding the best instrument, assessing costs of instrument. It provides facility for users to trade or shift the risk of its fnancial instrument. Besides these benefts, risk management also helps in reducing the risk of instrument, by avoiding, transferring, or by keeping the risk involved in the instrument. Hence by doing such analysis, risk management evaluates the instrument by analyzing its performances (Jalal et al., 2011. p. 34). The risk factors involved in the instrument can be said to beunpredictable due to changes in return and risk of the selected portfolio by the investor. Here, the risks which are involved in the portfolio are as: Credit risk, operational risk and market risk (Jalal-Karim, 2013. p. 8). Risk management has resultedin increase in the earnings of the companies. It leads to an extraordinary increase in the growth of the company. The increase has been noticed in the earning and growth of the companies, this was due to managing the portfolio in such a way that it minimizes the risk involved and maximizes the return. One of the examples of risk management is hedging or use of derivatives. The fnancial crisis faced by banks and fnancial institution in the period of 2007-2009 was due to not complying with the process of risk management. This has affected the whole banking system (Mikes and Kaplan, 2014. p. 45). This journal paper provides a contextual and conceptual background of risk management factor and mitigating the factors of risk. For better understanding to the topic, the paper uses enterprise risk management model for management of risk in an organization. The paper provides a brief understanding of research that should be conducted in future by providing conceptual, contextual, methodology and fndings that can be applied in the portfolio.