What is 'business risk'? What is its nature?
What is 'business risk'? What is its nature?
Business risk refers to the possibility of losses or inadequate profits due to uncertainties or unexpected events, which are beyond control. For example, demand for a product may decline due to the change in tastes and preferences of the customers or due to change in fashion and so on. Nature of Business risk :
(a) Business risk arises due to uncertainties of the future on which there is no control of the business.
(b) Risk is an important characteristic of the business. No business can avoid risk although the degree of risk may vary. Risk can be reduced but can't be eliminated.
(c) The degree of risk depends upon the type nature and size of the business. The risk is higher in the case of firms producing fashion items, firms operating at a large scale.
Business risk refers to the possibility of losses or inadequate profits due to uncertainties or unexpected events, which are beyond control. For example, demand for a product may decline due to the change in tastes and preferences of the customers or due to change in fashion and so on. Nature of Business risk :
(a) Business risk arises due to uncertainties of the future on which there is no control of the business.
(b) Risk is an important characteristic of the business. No business can avoid risk although the degree of risk may vary. Risk can be reduced but can't be eliminated.
(c) The degree of risk depends upon the type nature and size of the business. The risk is higher in the case of firms producing fashion items, firms operating at a large scale.
