Definition of Business Risks
The Term Business Risks refers to the possibility of incurring inadequate profits or may be even loss due to probability of happening of unexpected events. Business Risk can be explained better with the help of an Example. Demand of any product depends up on the marketability and advertising of the product. It is possible that Demand of any product may decline due to change in tastes and preferences of consumers or also due to increased competition resulting from the producers. Lower demands will result in long profits and sales. The shortage of any product in market will directly have an impact on the prices of goods. Therefore the firm willing to purchase Raw Materials will have to pay more prices which will lead to increase in cost of production and it will have a negative impact on the profits of the company. Courseworktutors Inc has best experts to help students on all kinds of Business Risk Assignment Help and Business Risk Homework Help.
Nature of Business Risks
- Uncertainty in Business: Uncertainty in business is one of the main reason for business Risk. Lack of Knowledge about the future business , Change in demand of product , Natural Calamities , Change in Government Policies etc. are some examples of Uncertainties which results in risk for business because outcome of all these future events are unknown .
- Degree of Risk is directly proportional to the Nature and Size of business: The main purpose of any business is to maximize their earnings by increasing their profits. The nature of business such as types of goods as well as services produced and sold and the size of business such as volume of production and quantum of sale of goods are the main factors which determine the amount of risk in business.
- Profit is the Reward for the Risk Undertaken: The entrepreneur enjoys the profit for the Risk undertaken by them. Generally higher would be the risk, more would be the profit. No Risk, No Gain is an old age principle which applies to all types of business. Profit is thus the reward for the Risk taken. Higher would be the risk, higher would be the profit and Vice Versa.
Causes of Business Risk
There are various causes of business risks which can be classified as follows:
- Natural Causes
- Human Causes
- Economic Causes
- Sociopolitical Causes
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