The word ‘Risk’ means the possibility of loss due to some calamity or disaster. This possibility gives rise to uncertainties and these uncertainties, in turn, give birth to risk.

According to Franknitto, “Risk is a measurable uncertainty”.

According to Bourne and Kurtz, “Risk is the possibility of loss or damage”.

Economic Risks: 

Economic risks are those risks which directly affect the monetary and profit earning activities of the business. These risks can bring to an end the existence of a business.

Main Economic risks are as follows: 

1. Tax Structure Risk – 

Tax structure includes various parts, viz. income tax, corporation tax, sales tax, estate duty, customs duty, etc. Any change in the tax structure by the government creates risk. 

2. Risk Related to Liberalisation – 

It is an economic activity under which the rules, controls and prices are liberalised or relaxation are given in rules, controls with an objective to increase the rate of economic growth. This reduces certain risks in business but increases the risk related to market competition. 

3. Monetary Policy related Risk – 

This policy aims at controlling the amount of money and credit as well as the banking activities of a country. Monetary policy is executed by the central bank of the country. Monetary Policy can have both negative and positive impact on business risk. 

4. Risks Related to Economic and Trend Condition – 

Components like national income, economic development, employment conditions, the purchasing power of money, trade cycles, etc. have a direct impact on business risk. 

5. Risks related to Currency and Capital Market – 

When the financial market works favourably in the right direction, adequate funds are available for development and this reduces the risk of fund management. 

6. Risk Resulting from Privatization – 

It is a process of favourable and positive change in the economic sphere. This reduces certain risks in business but increases the risk related to market competition.