Answer:
Ans. The term 'business risk' refers to possibility of inadequate profits or even losses due to uncertainties, e.g., changes in tastes and preferences of consumers, strike, increased competition, change in Government policy etc. These are of two types - speculative and pure.
Nature of Business Risks:
1. Business risks arise due to uncertainties: Natural calamities, changes in demand and prices, change in technology, etc. are some of the examples of uncertainty which create risks.
2. Risk is an essential part of every business: No business can avoid the risk. Risk can be minimised, but cannot be eliminated.
3. Degree of risk depends mainly upon the nature and size of business: For a small scale business it is less and for a large scale business it is more.
4. Profit is the reward for risk taking: An entrepreneur assumes the risks and in consideration, he gets reward which is called profit. Greater the risk, the higher is the chance of profit.
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