√ Definition of Business Risk, Type, Classification & Causative Factors
Definition of Business Risk, Type, Classification & Causative Factors – In this discussion we will explain about Business Risk. Which includes the understanding of business risk, types of business risk, classification of types of business risk, factors that cause business risk with a complete and easy-to-understand discussion.
Definition of Business Risk, Type, Classification & Causative Factors
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Definition of Business Risk
Business risk is an action that is often associated with the possibility of unexpected and unwanted losses.
Types of Business Risks
The types of business risks that are usually experienced in the world of business or entrepreneurship include the following:
Company Risk
Company risk is a risk that occurs and has an impact on the viability of the company or the shares in the company.
Financial Risk
Financial risk is a risk that will often have an impact on losses on the company's financial aspects.
Capital Risk
Capital risk is the risk that arises due to losses on the sale of liquidity and finance which can make business capital decrease significantly.
Market Risk
Market risk is the risk arising from business competition due to consumer lifestyles, changing patterns of competition, or the emergence of new, more potential competitors in the product market.
Operational Risk
Operational risk is the risk that arises due to deviations from prediction results. This can happen because of the imperfect implementation of decisions, human resources, technology, changes in innovation and quality systems.
Business Risk Classification
There are several types of business risk classification, namely:
Business Risk by Its Nature
-
Pure Risk
That is a risk that is certain to bring about a loss. An example is a disaster. Risk -
Speculative Risk
Namely the risks that can arise due to intentional related parties in order to gain profits, such as credit. -
Fundamental Risk
It is a risk that cannot be delegated to one person or another. -
Special Risks
Is a risk that arises because the source is from a single or independent event making it easy to find out the cause of its occurrence. Examples are plane crashes and ships sink. -
Dynamic Risk
Is a risk due to the advancement of a technology.
Business Risk According to Can and Not Transferred
- Transferable risk. For example, insurance
- Non-transferable risk. For example, like getting a ticket
Business Risk According to the Source
- Internal risk is a risk that comes from within the company. Like damage to machines, or tools
- External risk is a risk that comes from external / outside the company. Like a power outage.
Factors Causing Business Risk
According to abbot, there are three factors that influence the uncertainty that leads to the occurrence of financial risk. The uncertainty is caused by the following factors:
- Economic uncertainty
- Uncertainty caused by nature
- Uncertainty caused by human behavior (human uncertainties).
In addition to the above, there are several factors that cause business risk to occur, including:
- Changes, including:
- Environment
- Social and economic
- Competition
- One of them is a strategy and marketing
- Incorrect decisions lead to emergence outside the plan.
- Inadequate preparation
- Personal equipment or person in charge.
Classification of Insiders Facing Risks
Entrepreneurs or someone can be classified according to their perspective in dealing with business risks, namely:
a. Risk Avoiders
Is a person who does not like to face risks even more to avoid risks.
b. Risk Calculator
Is a person who is brave when making decisions when facing risks, provided that the level of loss from risk can still be calculated
c. Risk Takers
Is a person who dares to take risks, this person is often speculative in making decisions by using his intuition in measuring risk.
d. RiskManager
Is a person who dares to make decisions by calculating the level of risk and uncertainty. People like this often use their strong intuition to gain business advantage.
Thus has been explained about Definition of Business Risk, Type, Classification & Causative Factors, hopefully can add to your insight and knowledge. Thank you for visiting and don't forget to read other articles.
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