What is business risk? What is its nature?

Explanation

Business risks refers to the possibility of inadequte profits or even losses due to uncertainities or unexpected events. For example, Demand in a particular product may decrease due to change in consumer's tastes or due to increased competititon from other producers.


Business risks maybe of two types: Speculative and pure


i)Speculative risks
involve both the possiblitiy of gain and loss. It arises due to changes in the market conditions including fluctuations in demand and supply, changes in prices or changes in fashion


ii)Pure risks
involve the possibility of loss or no loss. The chances of fire,theft or strikes are examples of pure risks.