Question

Write short notes on the following.

Causes of Business risk

Answer 1

The following are the various causes of business risk:
i. Natural causes: Unforeseen natural calamities, such as earthquake, flood and famine cause heavy and irreplaceable losses to a business. The business risk posed by natural factors is beyond the control of businesses.

ii. Economic causes: These causes are related to the uncertainties associated with changes in competitors’ policies, price change, change in consumer preferences, change in technology, etc. Demand of goods are highly affected with all these factors.

iii. Human causes: These causes are related to the actions of human beings. Among the human causes of business risk are carelessness, strikes, riots, bomb blasts etc. Such factors affects the business to a great extent.

iv. Governmental causes: The government policies play an important role in the working of a business. However, uncertainties associated with changes in government policies such as price policy or change in export-import policy may bear an impact on the business.

v. Other causes: Besides the causes mentioned above, there are a few unpredictable events that cause business risk—for example, political disturbances, change in tastes and preferences of people, exchange-rate or interest-rate fluctuations and change in competition levels.