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