Give my four illustrations of
business risks
Answers
Answer:
1. Strategic Risk
Everyone knows that a successful business needs a comprehensive, well-thought-out business plan. But it’s also a fact of life that things change, and your best-laid plans can sometimes come to look very outdated, very quickly. This is strategic risk. It’s the risk that your company’s strategy becomes less effective and your company struggles to reach its goals as a result. It could be due to technological changes, a powerful new competitor entering the market, shifts in customer demand, spikes in the costs of raw materials, or any number of other large-scale changes.
2. Compliance Risk
Of course you are (I hope!). But laws change all the time, and there’s always a risk that you’ll face additional regulations in the future. And as your own business expands, you might find yourself needing to comply with new rules that didn’t apply to you before. For example, let’s say you run an organic farm in California, and sell your products in grocery stores across the U.S. Things are going so well that you decide to expand to Europe and begin selling there.
3. Operational Risk
So far, we’ve been looking at risks stemming from external events. But your own company is also a source of risk. Operational risk refers to an unexpected failure in your company’s day-to-day operations. It could be a technical failure, like a server outage, or it could be caused by your people or processes.In some cases, operational risk has more than one cause. For example, consider the risk that one of your employees writes the wrong amount on a check, paying out $100,000 instead of $10,000 from your account.
4. Financial Risk
Most categories of risk have a financial impact, in terms of extra costs or lost revenue. But the category of financial risk refers specifically to the money flowing in and out of your business, and the possibility of a sudden financial loss.
For example, let’s say that a large proportion of your revenue comes from a single large client, and you extend 60 days credit to that client (for more on extending credit and dealing with cash flow, see our earlier cash flow tutorial).
5. Reputational Risk
There are many different kinds of business, but they all have one thing in common: no matter which industry you’re in, your reputation is everything. If your reputation is damaged, you’ll see an immediate loss of revenue, as customers become wary of doing business with you. But there are other effects, too. Your employees may get demoralized and even decide to leave. You may find it hard to hire good replacements, as potential candidates have heard about your bad reputation and don’t want to join your firm. Suppliers may start to offer you less favorable terms. Advertisers, sponsors or other partners may decide that they no longer want to be associated with you.
Explanation:
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Answer:
1. Strategic Risk
Everyone knows that a successful business needs a comprehensive, well-thought-out business plan. But it’s also a fact of life that things change, and your best-laid plans can sometimes come to look very outdated, very quickly. This is strategic risk. It’s the risk that your company’s strategy becomes less effective and your company struggles to reach its goals as a result. It could be due to technological changes, a powerful new competitor entering the market, shifts in customer demand, spikes in the costs of raw materials, or any number of other large-scale changes.
2. Compliance Risk
Of course you are (I hope!). But laws change all the time, and there’s always a risk that you’ll face additional regulations in the future. And as your own business expands, you might find yourself needing to comply with new rules that didn’t apply to you before. For example, let’s say you run an organic farm in California, and sell your products in grocery stores across the U.S. Things are going so well that you decide to expand to Europe and begin selling there.
3. Operational Risk
So far, we’ve been looking at risks stemming from external events. But your own company is also a source of risk. Operational risk refers to an unexpected failure in your company’s day-to-day operations. It could be a technical failure, like a server outage, or it could be caused by your people or processes.In some cases, operational risk has more than one cause. For example, consider the risk that one of your employees writes the wrong amount on a check, paying out $100,000 instead of $10,000 from your account.
4. Financial Risk
Most categories of risk have a financial impact, in terms of extra costs or lost revenue. But the category of financial risk refers specifically to the money flowing in and out of your business, and the possibility of a sudden financial loss.
For example, let’s say that a large proportion of your revenue comes from a single large client, and you extend 60 days credit to that client