Agency Problem: An agency problem is a conflict between two parties (often referred to as the principal and the agent) in which the agent’s interests are not aligned with those of the principal. Usually, this occurs when an agent has been given the authority to act on behalf of a principal but then fails to do so due to their own personal gain or another incentive. The agency problem can be problematic for investors because it increases the risk of the investment going wrong, and thus lead to losses. To counter this, investors should ensure that they have clarity on roles and responsibilities and consider ways to monitor agents behavior.