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What do you mean by business risk? Explain briefly types of business risks.

Answer»

Business risk:

The risk of uncertain profit or even loss that lies while doing business is called business risk. There always remains uncertainty of profit or even risk of incurring loss in the business. Thus, the uncertainties associated with business that may result into loss of profit and even loss of business is termed as business risk.

Types:
(A) Natural risks:

  • Risk of loss that may occur due to fury of nature is called natural risk.
  • Natural risks that may harm the business could be earthquake, flood, fire, etc.
  • These factors may damage or destroy business assets like machinery, / furniture, stock, etc.
  • These risks are natural and man or business has no control over them.

(B) Man-made risks:

  • Risks that are generated due to man-made factors are called man-made business risks.
  • These risks could be strike of employees, change in technology, change in preference and demand of customers, political factors in the state, competition in market, etc.


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