The term business risks refers to the possibility of a commercial

business Business is the practice of making one's living or making money by producing or Trade, buying and selling Product (business), products (such as goods and Service (economics), services). It is also "any activity or enterprise entered into for pr ...

making inadequate profits (or even losses) due to uncertainties - for example: changes in tastes, changing preferences of consumers,

strikes Strike may refer to: People *Strike (surname) Physical confrontation or removal *Strike (attack), attack with an inanimate object or a part of the human body intended to cause harm *Airstrike, military strike by air forces on either a suspected ...

, increased competition, changes in government policy, obsolescence etc. Every

business organization A business entity is an entity that is formed and administered as per corporate law in order to engage in business activities, charitable work, or other activities allowable. Most often, business entities are formed to sell a product or a servi ...

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. For example, a company may face different risks in production, risks due to irregular supply of

raw material A raw material, also known as a feedstock, unprocessed material, or primary commodity, is a basic material that is used to produce goods, finished goods, energy, or intermediate materials that are feedstock for future finished products. As feedst ...

s, machinery breakdown, labor unrest, etc. In marketing, risks may arise due to fluctuations in market prices, changing trends and

fashion Fashion is a form of self-expression and autonomy at a particular period and place and in a specific context, of clothing, footwear, lifestyle, accessories, makeup, hairstyle, and body posture. The term implies a look defined by the fashion in ...

s, 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 Business operations is the ''harvesting'' of value from assets owned by a business. Assets can be either ''physical'' or '' intangible''. An example of value derived from a physical asset, like a building, is rent. An example of value derived fro ...

. 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): * 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. Many business risks can be related to one another. With the introduction to the

Coronavirus Coronaviruses are a group of related RNA viruses that cause diseases in mammals and birds. In humans and birds, they cause respiratory tract infections that can range from mild to lethal. Mild illnesses in humans include some cases of the com ...

in 2019, many businesses fell victim to a lot of risks as a result of the damage to the market. A lot of internal risks arose including the much needed transition to online communication, via Zoom etc., within a business. A specific example of external risks can be highlighted by the change in the stock market in early 2020. Between late February to late March, out of the 22 stock market trading days, there were 18 drastic stock market jumps. Stock market jumps can ultimately cause stocks to have lower stability and higher volatility. The uncertainty of whether or not a stock is secure indicates a risk of any certain business.

Classification

The business risk is classified into five different main types # Strategic risk: They are the risks associated with the operations of that particular industry. These kind of risks arise from: ## Business environment: Buyers and sellers interacting to buy and sell goods and services, changes in supply and demand, competitive structures and introduction of new technologies. ## Transaction: Assets relocation of mergers and acquisitions, spin-offs, alliances and joint ventures. ## Investor relations: Strategy for communicating with individuals who have invested in the business. #

Financial Risk Financial risk is any of various types of risk associated with financing, including financial transactions that include company loans in risk of default. Often it is understood to include only downside risk, meaning the potential for financial ...

: These are the risks associated with the financial structure and transactions of the particular industry. # Operational risk: These are the risks associated with the operational and administrative procedures of the particular industry. # Compliance risk (legal risk): These are risks associated with the need to comply with the rules and regulations of the government. # Other risks: There would be different risks like natural disaster (floods) and others depend upon the nature and scale of the industry.

References

{{Reflist Risk management in business