write a short note on business risk.
Answers
Explanation:
The term business risks refers to the possibility of a commercial business making inadequate profits (or even losses) due to uncertainties - for example: changes in tastes, changing preferences of consumers, strikes, increased competition, changes in government policy, obsolescence etc. Every business organization faces various risk elements while doing business. Business risk implies uncertainty in profits or danger of loss and the events that could pose a risk due to some unforeseen events in future, which causes business to fail.[1][dead link][2][3]
For example, a company may face different risks in production, risks due to irregular supply of raw materials, machinery breakdown, labor unrest, etc. In marketing, risks may arise due to flucuations in market prices, changing trends and fashions, errors in sales forecasting, etc. In addition, there may be loss of assets of the firm due to fire, flood, earthquakes, riots or war and political unrest which may cause unwanted interruptions in the business operations. Thus business risks may take place in different forms depending upon the nature of a company and its production.
Business risks can arise due to the influence by two major risks: internal risks (risks arising from the events taking place within the organization) and external risks (risks arising from the events taking place outside the organization):[4][5][6]
Internal risks arise from factors (endogenous variables, which can be influenced) such as:
human factors (talent management, strikes)
technological factors (emerging technologies)
physical factors (failure of machines, fire or theft)
operational factors (access to credit, cost cutting, advertisement)
External risks arise from factors (exogenous variables, which cannot be controlled) such as:
economic factors (market risks, pricing pressure)
natural factors (floods, earthquakes)
political factors (compliance demands and regulations imposed by governments)
Though corporate entities may have an image of risk aversion, they may continue to stake their reputations and indulge in their gambling propensities by sponsoring competitive sports teams.
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.