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Business Risks

Every business organisation involves some element of risk. Risk implies uncertainty of profits or danger of loss due to some unforeseen events in the future. An entrepreneur may encounter risks in every area or function of a business. For example:- in production, risks may arise due to irregular supply of raw materials, break down of machinery, labour unrest, etc; in marketing, risks may occur on account of price fluctuations,change in tastes and fashions, errors in sale forecasting, trade cycles, etc. In addition, there may be loss of assets of a firm due to fire, flood, earthquake, riots, war or political unrest which may cause unwanted interruptions in business operations. Thus, business risks may take place in a variety of forms. Though risks are universal,but all business enterprises do not face same type and degree of risks. They may vary according to the nature and size of a business.

These risks are inevitable in a business and cannot be eliminated completely but they can be controlled through proper preventive and corrective measures of risk management. The process of management of risk involves:-

  • Identification of the risks
  • Evaluation of the risks
  • Choice of the right method for handling of risks
  • Evaluating the aftermath of the chosen method

Hence, an entrepreneur can face the risks effectively by anticipating their nature and causes and adopting appropriate techniques in order to minimise their negative consequences.

Also, gains in a business are inseparably linked to these inherent risks. In other words,' no risks, no gains' is a fundamental principle of a business. Hence, high profits of the big business houses are the rewards for successful management of the business risks by their entrepreneurs.

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