Types of Business Risk

Risk simply means the circumstances that pulls someone and something valued to danger. Whereas a business risk is a exposure to uncertainties and undesirable situations that may lead to company’s failure and downfall.  Simpy anything or stuffs that threaten’s company ability to meet targeted goals is called Business Risk.

Some of the business risks are listed below.

  1. Financial Risk
  2. Strategic Risk
  3. Compliance Risk
  4. Legal Risk
  5. Political Risk
  6. Operational Risk
  7. Seasonality Risk
  8. Reputational Risk
  9. Innovation Risk
  10. Quality Risk
  11. Resource Risk

Also Read: Tourism and Aviation Scenario In Nepal.

1. Financial Risk Such type of risk is associated with company’s capital structure, financing and the finance industry. Company’s failure to repay a loan
according to the terms agreed can be a example of financial risk. Also when client delays the payment or fails to pay the payment, company faces a financial instability.

2.Strategic Risk Vital hazard emerges when a business does not work as per the plan or strategy of an organization. The strategy is prime part of every business organization and when the plan fails there is a chance of business downfall risk. So when a management doesn’t come up with a right strategy it is called strategic risk.

3.Compliance Risk  There are the chances that a company may breach rules, regulation and laws. This kind of compliance risk is likely to occur on businesses that are highly regulated by laws. So for a successful running of business it needs to adhere some norms and legislation implied by the authority. When a business becomes unable to comply with such norms it is likely to face compliance risk.

4. Seasonality Risk It is likely to occur on service sector businesses like tourism and hotels. Such businesses rely on seasons. There’s a high and a low season resulting to seasonality risk.

5. Innovation Risk Innovation in terms of service, product and strategy is needed for a business to be flexible and adapt the changing environment. But every time a business may not be able to innovate new products and ideas which may cause invitational risk.

6. Operational Risk This is the risk that is caused by the internal failures of an organization and doesn’t relates with the external environment. For an example machinery fails, plan fails, etc. The potential of failures related to the day-to-day operations of an organization is operational risk.

7 Quality Risk It is the failure of an organization to meet the targeted or promised quality for an product or service. Such kind of risk may lead to low sales and profit.

8 Resource Risk It is a kind of risk that is caused by limited resources like capital, labor, market, raw materials, etc. Such limitations hampers an organization to meet it’s targeted goals.

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