What is bussiness risk.explain various causes of business risk?
Answers
Answer:
Business risk refers to the uncertainties that leads to unprecedented profits or losses.
The causes may be as follows:
Natural Calamity: Natural calamities like flood, earthquake, famine cannot be controlled. Such calamities result in a great loss of property and resources.
Economic Causes: These include change in the demand or supply, change in prices, competition, change in technology etc. Rise in lending interest, taxes etc are financial problems which are also considered in these.
Internal causes: These include dishonesty, negligence and absenteeism of employees, internal conflict, inefficient management, strikes and riots etc.
Other causes: These may include fluctuations in exchange rates, political disturbances or any such unforeseen events.
Answer:
Business risk is the possibilities a company will have lower than anticipated profits or experience a loss rather than taking a profit. Business risk is influenced by numerous factors, including sales volume, per-unit price, input costs, competition, and the overall economic climate and government regulations.
Types of Business Risk
The business risk can be classified into two major categories:
Insurable Risk
- The risks which can be recovered are called insurable risks. The losses which can be made good or losses for which company can get compensation from the insurance company are called Insurable Risks. Generally, the natural and physical risks are insurable risks, e.g., businessmen can take a fire insurance policy to get protection from flood, earthquake or from the damage of assets such as the bursting of boiler etc.
Non-insurable Risks
- The risks for which no protection is available are called Non-insurable risks. The businessmen cannot get compensation for a change in demand or loss due to negligence or carelessness of employees. Whether the risk is insurable or non-insurable, only the loss can be shared but the risk remains