WHAT IS BUSINESS RISK AND WRITE ITS NATURE OR
FEATURES AND CAUSES OF BUSINESS RISKS?
The term business risk refers to the possibility of inadequate
profits or even losses due to uncertainties or unexpected events.
For example, demand for a particular product may decline due to
change in tastes and preferences of consumers or due to increase
competition from other producers. Business enterprises constantly
face two types of risk viz…., speculative risk and pure risk.
Speculative risks involve possibility of gain as well as
possibility of loss. It may arise due to changes in market conditions,
such as change in demand, change in prices, etc. Favourable market
conditions are likely to result in gains, whereas, unfavourable ones
result in losses.
Pure risks involve only the possibility of loss. The chance of
fire, theft or strike are examples of pure risks.
NATURE / FEATURES / CHARACTERISTICS OF BUSINESS
RISKS
Following are the main characteristics of business risk:
1. Business risks arise due to uncertainties: Uncertainty
refers to the lack of knowledge about what is going to
happen in the future. Natural calamities, change in
demand and prices, changes in government policy,
improvement in technology etc. are examples of
uncertainty, which create risks for business.
FEATURES AND CAUSES OF BUSINESS RISKS?
The term business risk refers to the possibility of inadequate
profits or even losses due to uncertainties or unexpected events.
For example, demand for a particular product may decline due to
change in tastes and preferences of consumers or due to increase
competition from other producers. Business enterprises constantly
face two types of risk viz…., speculative risk and pure risk.
Speculative risks involve possibility of gain as well as
possibility of loss. It may arise due to changes in market conditions,
such as change in demand, change in prices, etc. Favourable market
conditions are likely to result in gains, whereas, unfavourable ones
result in losses.
Pure risks involve only the possibility of loss. The chance of
fire, theft or strike are examples of pure risks.
NATURE / FEATURES / CHARACTERISTICS OF BUSINESS
RISKS
Following are the main characteristics of business risk:
1. Business risks arise due to uncertainties: Uncertainty
refers to the lack of knowledge about what is going to
happen in the future. Natural calamities, change in
demand and prices, changes in government policy,
improvement in technology etc. are examples of
uncertainty, which create risks for business.
