No business is risk free in the light of this statement, explain the concept of business risk and its any three causes.
Risk is an essential part of every business : No business can avoid risk
although the amount of risk may vary from business to business. Risk
can be minimised but cannot be eliminated.
Degree of risk depends mainly upon the nature and size of business :
Level of risk is lower for small scale business while it is higher for large
scale organisation.
Profit is the reward for risk taking : A business gets profit as return for
undertaking risk. Greater the risk involved in a business, higher is the
chance of profit.
Causes of Business Risks
1. Natural Causes : Human beings have little control over natural calamities
like flood, earthquake, famine etc. They result in heavy losses of life,
property & income in business.
2. Human Causes: Human causes include such unexpected events like
dishonesty, carelessness or negligence of employees, strikes, riots,
management ineffeciency etc.
3. Economic causes : They are related to a chance of loss due to change
in market condition e.g., fluctuations in demand and prices, competition,
change in technology etc.
4. Physical causes : Mechanical defects or failures may also lead to losses
e.g., bursting of boiler or machine may cause death or destruction.
5. Other causes : These include unforeseen events like political disturbances,
fluctuation in exchange rates etc.
although the amount of risk may vary from business to business. Risk
can be minimised but cannot be eliminated.
Degree of risk depends mainly upon the nature and size of business :
Level of risk is lower for small scale business while it is higher for large
scale organisation.
Profit is the reward for risk taking : A business gets profit as return for
undertaking risk. Greater the risk involved in a business, higher is the
chance of profit.
Causes of Business Risks
1. Natural Causes : Human beings have little control over natural calamities
like flood, earthquake, famine etc. They result in heavy losses of life,
property & income in business.
2. Human Causes: Human causes include such unexpected events like
dishonesty, carelessness or negligence of employees, strikes, riots,
management ineffeciency etc.
3. Economic causes : They are related to a chance of loss due to change
in market condition e.g., fluctuations in demand and prices, competition,
change in technology etc.
4. Physical causes : Mechanical defects or failures may also lead to losses
e.g., bursting of boiler or machine may cause death or destruction.
5. Other causes : These include unforeseen events like political disturbances,
fluctuation in exchange rates etc.