Updated: Aug 20
Starting a new business venture or managing an organization originates with some risks and that is not a surprise. However, business risk includes specifically the things that may threaten the financial health of a company or lead to bankruptcy.
Business risks can occur in different sources and two ways- internal or external. Therefore, it is important to know where and how the company can be the most vulnerable to such risks.
It is a threat to a company's ability to accomplish its financial goals. In businesses, risk implies that the goals of a company or an organization may not take turns as they were planned to meet the target.
It is not right to blame the owner of the company for dealing with the risks. Risks are influenced by external factors also like growing competition, increased expenses of raw materials, or changes in the current government regulations.
Here are some business risks listed below-
The economy changes constantly because the market flutters. Some good changes turn out to be beneficial for the economy and lead to prosper environment. On the other hand, some changes are not beneficial for the economy and can reduce sales. Therefore, it is important to plan for the company's economy and keep an eye on the changes.
In competitive risk, your competitor may get advantages over you and will limit you to attain your goals. For example, your competitor may have a better product or an essentially more reasonable price base.
It is said that operational risks are caused due to failed or inadequate processes. The possibility of failures compared to the day-to-day progress of an organization such as a customer service process. However, successful and complete operational processes also cause risk.
Practices like dishonesty, disrespect, or incompetence may decline the reputation of the organization which may bring it on the line or might bring one's reputation at risk. The term is used to describe the risk of the major loss of confidence in an organization rather than a minor decline in reputation.
The prospective for new tax laws or a conception that results in greater taxation than expected taxation. In several instances, new tax laws can disturb the business model of the industry completely.
Some risks are related to the innovative areas of the business like product research. These areas require adapting the risk management practices to speed and relatively hazardous projects.
There are chances of violating laws and regulations. In some instances, businesses serve to follow the laws completely but end up breaking them due to failure or errors.
Strategic risks can befall at any time. For instance, a company that makes an anti-mosquito lotion may a reduction in sales because now there is a change in people's choices. They are now into spray mosquito repellent and not a lotion. Therefore, to deal with these risks, the company needs to start a feedback system to know the requirements of the customers.
Financial risks are regarding the financial condition of the company. Is the financial condition of the company strong enough to afford to give instalment payments to the buyers? To how many buyers can they offer this instalment scheme? Is it possible to manage the business operation when a few buyers cannot pay the instalments on time?
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