What do you mean by business risk? Explain the natural causes of business risks.
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Answer:
Natural Causes
Natural calamities like earthquake, flood, drought, famine etc. Affect a business a lot and can result in heavy losses. The natural causes are such type of uncertain factors that human beings cannot make any preparation against.
Business risk refers to the possibility of inadequate profits or even losses due to uncertainties or unexpected events .
NATURE OF BUSINESS RISKS :-
♥ Business risks arise due to uncertainties - Lack of knowledge of what is going to happen in future create uncertainties in business . It may be due to natural calamities , change in demand and prices , strikes etc .
♥ Risk is an essential part of every business - No business can avoid risk although the amount of risk may vary from business to business . Risk can be minimized but cannot be eliminated .
♥ Degree of risk depends mainly upon the nature and size of business - Level of risk is lower for small scale business while it is higher for large scale organization .
♥ Profit is the reward for risk taking - A business gets profit as return for undertaking risk . Greater the risk involved in a business , higher is the chance of profit .