Business Risk :-
In every business there is a chance of loss, because future is uncertain. So business risks means the occurrence of those events which become the cause of loss in the business. A businessman earns the profit at the risk of loss. So risk is an essential element in business. While in business decision making means the evaluation of risks and profits involved in business activities.
There are large number of uncertain events in business like fall in demand, strike of workers, theft, break down of machinery etc.
KINDS or TYPES OF BUSINESS RISK :-
The risk may be classified in to various types. Following are the important kinds of risks :
1. By Organization.
2. By Occurrence Events.
3. By Nature.
4. By Controllable.
5. By Protection.
1. CLASSIFICATION OF ORGANIZATION :-
In this regard there are two types of risks :
A. Internal Risks :-
This risks of losses due to internal affairs of the business organization are called internal risks. These can be normally controlled by management.
B. External Risks :-
There are large number of external factors like fall in demand due to war or the change in fashion are called the external factors which become the cause of loss. So such type of risks of losses are called external risks. Normally these are beyond the control of an organization.
2. CLASSIFICATION BY OCCURRENCE EVENT :-
It has two kinds :
A. Property Risks :-
If due to any event property of the firm destroys it will be called property risks. For example if building of the firm destroys due to fire, it will be called property risk.
B. Liability Risks :-
Some time a firm held responsible for losses by any other firm or a person. Such type of losses risks are known liability risks. For example there is a firm which is providing food to the people now if one person eats the food and dies. Now a firm will be held responsible for such loss.
3. CLASSIFICATION BY NATURE :-
It can be classified in two types :