Thursday 22 January 2009

Business risk

Business risk

Business risk is the variability in a firm’s sales or in its ability to sell its product.

It is associated with the top of the income statement.

Business risk surfaces for a number of reasons.

  1. For instance, consumer tastes may change.
  2. An automobile company might introduce a new compact car at a time when people are looking for larger luxury cars or minivans.
  3. A clothing manufacturer might be unable to react quickly to shifting fashion styles.
  4. Business risk also arises from macroeconomic changes, such as
  • a recession leading to reduced consumer spending, or
  • high interest rates making people reluctant to buy houses.

Also read: Understanding Risk
Partitioning Risk
Business risk
Financial risk
Purchasing power risk
Interest rate risk
Foreign exchange risk
Political risk
Social risk

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