What are Business Risk??

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Business risk refers to a threat to the company’s ability to achieve its financial goals. In business, a risk means that a company’s or an organization’s plans may not turn out as originally planned or that it may not meet its target.

Such risks cannot always be blamed on the owner of the company, as risk can be influenced by various external factors, which may include rising prices of raw materials for production, growing competition, and even changes and additions to existing regulations set by the government.

Types of Risks in Business

1. Strategic risk

Strategic risks can occur at any timeme. For example, a company manufacturing an anti-mosquito lotion may suddenly see a decline in its sales because people’s preferences have changed, and they now want a spray mosquito repellent rather than a lotion. To avoid having to face such a risk, companies need to implement a real-time feedback system to know what its customers want.

2. Compliance risk

Compliance risk involves companies having to comply with new rules that are set by the government or by any other governing body. For example, there may be a new minimum wage that must be implemented immediately.

3. Financial risk

Financial risk is about the financial health of the company. Can the company afford to offer installment payments to its customers? How many customers can it offer such an installment scheme? Can it handle business operations when two or three of these customers are not able to make their payments on time?

4. Operational risk

Operational risk occurs within the business’ system or processes. For example, one of its production machines breaks down when the target output is still unmet. What will the company do if one of its machine operators has an accident during work hours?