Question

Explain the concept of business risk and its causes.

Answer 1

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.