Know Types of Business Risks

Posted on December 19, 2012 by

Risk in a business means that it cannot get proper finances. Risks can occur due to innumerable factors. Some risks can be avoided, reduced, and controlled. When you are doing business, you need to find sources of business risks in order to mitigate them. Two types of risks are internal and external.

Internal risks are the ones that arise from the events, which take place within the business premises and the external risks are the ones which arise by the events that occurs from the outside of the business.

Here is a list of risks that can be internal or external.

  • Strategic: These are the risks that are related to operations of a particular industry. These risks can arise from business environment, transaction scenarios, and investor relations, loss of major accounts, strict competition in the market, avoiding to pursue new opportunity.
  • Compliance: These are the risks that originate when there is a failure in regulation standards, contract agreements and legislation rules.
  • Financial: These risks originate due to the lack of management in business finances such as high interest rates, managing poor debt records, non-payment by customers etc.
  • Operational: These are the risks that originate from the failures within the organization such as key performer leaving the organization, equipment breakdowns, data thefts etc. These risks can create unforeseen results to the business.

The other reasons for occurring risks that arise in business are human factors, physical factors, natural disasters, political issues, client and customer relationships, delay in delivery etc.

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