Explain the pervasiveness of risks in business. Describe various types of business risks and the steps involved in managing business risk
Answers
Running a business can be a dangerous occupation with many different types of risk. Some of these potential hazards can destroy a business, while others can cause serious damage that can be costly and time consuming to repair. Despite the risks implicit in doing business, CEOs and/or risk management officers – no matter the size of the business, from small to corporate giant - can prepare for them if they know what they are.
If and when risk becomes reality, a well-prepared business can moderate the risk's impact. Dollar losses, lost time and productivity and the negative impact on customers can all be minimized. (For more, read Determining Risk And The Risk pyramid.)
Answer:
Typical risks a business faces can be divided into Internal and external risks.
Internal Risks Include:
Financial Risk: That a business might loose too much money or might not have enough money to keep it going
Technological Risk: That the service or technology they are using manufacturing goods becomes out-dated and they are left behind.
Human Resource: Bad employees who are ill-equipped and not hardworking can pose a risk
External Risks include:
Socioeconomic and political: This is an example of how political up heavel, social changes, and economic recessions and depression can hamper a business. It is not within the control of the company but it can have an impact on them
Natural Disasters: Flooding, earthquakes, etc can wipe a business out completely
Competition: Competitors always need to be looked out for! They always want to beat you and take your best customers
The best way to mitigate these is to carry out a risk assessment on at least an annual basis and invest thorough in R&D to stay ahead of each problem