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Business Risk

This document provides information about business risks in 3 sections. It begins by defining risk and business risk, noting that risk is the possibility of loss and business risk refers specifically to loss from business operations. It then discusses risk management as the systematic process of managing risk to achieve business objectives and notes that while risk cannot be eliminated, it can be reduced and managed. The main section describes the types and causes of business risks, including speculative risks which may result in profit or loss, and pure risks which can only result in loss. It lists natural causes, human causes, economic causes, and other causes of business risks for businesses. It concludes with some methods for minimizing business risks such as market research, new techniques, effective advertising, insuring

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1K views10 pages

Business Risk

This document provides information about business risks in 3 sections. It begins by defining risk and business risk, noting that risk is the possibility of loss and business risk refers specifically to loss from business operations. It then discusses risk management as the systematic process of managing risk to achieve business objectives and notes that while risk cannot be eliminated, it can be reduced and managed. The main section describes the types and causes of business risks, including speculative risks which may result in profit or loss, and pure risks which can only result in loss. It lists natural causes, human causes, economic causes, and other causes of business risks for businesses. It concludes with some methods for minimizing business risks such as market research, new techniques, effective advertising, insuring

Uploaded by

Vijay Sharma
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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INTERNAL

ASSESSMENT
III

Business
Studies
GROUP PRESENTATION
ON
BUSINESS RISKS
What is Risk?

• Risk –The possibility of


loss or injury

• Business Risk – Risk of


loss that is naturally
incurred by owning
or operating a business
Risk Management
• The systematic process of managing risk to achieve your
business objectives

Risk cannot be totally eliminated,


but it can be reduced and managed
Business risks
• Business risk is the possibilities a company will
have lower than anticipated profits or
experience a loss rather than taking a profit. 
For example, demand for a particular product
may decline due to change in tastes and
preferences of consumers or due to increased
competition from other producers.
• Decrease in demand will result in lesser sales
and profits. In another situation, the shortage
of raw materials in the market may shoot up
its price.
Types of Business Risks
• Business enterprises constantly face two types of risk:

Speculative Pure
 Speculative risk is a category of risk that can be taken on
voluntarily and will either result in a profit or loss.
 Eg. Most financial investments, such as the purchase of
 stock shares, involve speculative risk. 
 Pure risks involves situations where the only outcome is loss. Generally,
these sorts of risks are not voluntarily taken on 
 Eg. Should a person damage a car in an accident, there is no
chance that the result of this will be a gain. Since
the outcome of that event can only result in a loss, it
is a pure risk.
Nature of Business Risks
1. Arises due to uncertainties
2. Essential part of any business
3. Degree of risk depends upon the nature
and size of business

4. Profit is the reward for bearing the risk


CAUSES OF BUSINESS RISKS

• (i) Natural causes: Human beings have


little control over natural calamities like
flood, earthquake, lightning, heavy rains,
famine, etc. They result in heavy loss of
life, property and income in business.

• (ii) Human causes: Human causes include


such unexpected events like dishonesty,
carelessness or negligence of employees,
stoppage of work due to power failure,
strikes, riots, management inefficiency, etc.
Contd.

• iii) Economic causes: These include uncertainties relating


to demand for goods, competition, price, collection of
dues from customers, change of technology or method of
production, etc. Financial problems like rise in interest
rate for borrowing, levy of higher taxes, etc., also come
under these type of causes as they result in higher
unexpected cost of operation of business
• (iv) Other causes: These are unforeseen events like
political disturbances, mechanical failures such as the
bursting of boiler, fluctuations in exchange rates, etc.,
which lead to the possibility of business risks.
Minimising Business Risks

1. Market Research- Attain knowledge of market and its


environment
2. New Techniques- it doesn’t only mean the approach to sell
goods but it includes the production and all other
requirements
3. Effective advertisement- effective management for the sale
of goods in order to compete in the market minimises
business risks
4. Insuring goods-insuring about the goods means satisfying the
customer in one way about the product quality, the
customer feels satisfy and more interested in buying the
goods
Thank you
Presented by
Shruti Sharma
BBA LLB-1
Symbiosis Law School, Nagpur
______October 2019

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