Business Risks
The term ‘business risks’ refers to the possibility of inadequate profits or even losses due to uncertainties or unexpected events. Business enterprises may face two types of risk, i.e. speculative risk and pure risk. Speculative risks involve both the possibility of gain as well as the possibility of loss. It a rise due to a change in demand, change in price, etc. Pure risks involve only the possibility of loss or no loss. The chance of fire, theft or strike is examples of pure risks.
Nature of Business Risks
1. Business risks arise due to uncertainties.
2. Risk can be minimized, but cannot be eliminated. It is an essential part of business.
3. Degree of risk depends mainly upon the nature and size of business:
4. Profit is the reward for risk-taking.
Causes of Business Risks Business risks arise due to a variety of causes.
They are:-
1. Natural Causes:-
it includes natural calamities like flood, earthquake, lightning, heavy rains, famine, etc.
2. Human Causes:-
Human causes include dishonesty, carelessness or negligence of employees, strikes, riots, management inefficiency, etc.
3. Economic causes:
These include change in demand, change in price, competition, technological changes, etc.
4. Political Causes:-
Change in Govt, policies, taxation, licensing policy, etc.
