Business risk

Plus One Business Studies PPT

1. BUSINESS RISK Prepared By PRASANTH.S.R

2. Meaning of Business Risk Risk means possibility of loss. In business , risk is unavoidable. The term ‘business risks’ refers to the possibility of inadequate profits or even losses due to uncertainties or unexpected events.

3. Types of Business Risk Business enterprise usually face two types of risk ;Speculative and pure. Speculative risk involves both chance for a gain or loss. Such risk arise due to change in the market conditions like fluctuations in demand and supply, change in tastes and habits of customers. Pure risk involves the possibility of loss or even no loss. Fire, theft, earthquake, strike, etc... are example of pure risk

4. Nature of business risk

5. business risk arises due to uncertainties By uncertainty we mean lack of knowledge about what is going to happen in the future. Eg . Natural calamities, changes in Govt. Policy etc..

6. risk is an essential part of every business Risk is inherent in every business. Business can’t totally avoid risk although the degree of risk may differ from business to business. Risk can be minimised but, cannot be avoid.

7. Degree of risk depends mainly up on the nature and size of business Nature of business( volume of production and sale ) very much determine the degree of risk. Large scale business had more risk than small scale business.

8. Profit is the reward for risk taking Risk and gain are two sides of the same coin. No risk, No gain, is an old age principle, is applicable to all kinds of business. Greater the risk, more is the reward.

9. Causes of Business Risk

10. Natural causes Human beings have little control over natural calamities like flood, earthquake, lightning, heavy rains, famine, etc. These result in heavy loss of life, property and income in business.

11. 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.

12. 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 leads to loss.

13. 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.