[Music] sage here for kalki media please subscribe to the channel and press the bell icon to be notified of the latest videos thanks for joining us for our educational series today we're covering what is business risk a threat to a company's ability to meet its objectives is referred to as a business risk risk in business refers to the possibility that a company or organization's plans will not work out as expected and that it will miss its target or that it will fail to reach its objectives in simple terms business risk refers to the possibility of incurring losses or earning less profit than expected and these variables are beyond the control of businessmen and they can result in a decrease in profit or even a loss and business risk refers to the possibility that a company's earnings will be smaller than expected or that it will lose money instead of making a profit several factors affect business risks such as sales volume per unit price production costs competition the overall economic environment and government regulations in summary a threat to a company's ability to meet its objectives is referred to as a business risk and business risks nature may be strategic financial operational or compliance based several factors affect business risks such as production costs competition the overall economic environment government regulations internal management issues natural disasters etc what are the types of business risk depending on the nature of the causes and results business risks may be classified as follows at any point in time strategic risks may arise and companies must incorporate a real-time feedback system to know what their consumers want to deal with such threats strategic risks include mergers pressure from shareholders or creditors the pressure of competition with rivals changes in demand changes in rules and regulations by the government backfiring of a project or innovation political instability and sully reputation social distancing norms and lockdowns badly affected the dining options in restaurants and they were confined to home deliveries the financial health of the company is the subject of financial risk and factors that adversely impact the financial growth and profitability of a firm are called financial risk and financial risk may include excess debt mismanagement of cash flow and change in how bad debt reserves are estimated financial risks may also arise due to fluctuation in market interest rates and exchange rate an operational risk is a type of risk that exists within a company's system or processes or even people so while strategic risk is to do with doing what is right operational risk is about doing things in the right way a company's functionality is impacted by operational risks like fire crimes natural disasters cyber security failure embezzlement theft labor strike an example of operational risk is when many employees get affected by the covert 19 pandemic at the same time companies may face compliance risk if they are required to follow new rules established by the government or a regulatory body and tax evasion by passing environmental laws violation of labor laws financial irregularities irregularities in worker safety infrastructure in adequate measures for women's safety and child labour are all compliance risk factors a classic example of compliance risk is that of lehman brothers so what are the causes of business risk the following are the possible causes of business risk business competitors when a company faces strong rivals in the market the manufacturers engage in throat competition by lowering the price of goods or manufacturing lower quality products and this poses a significant risk to the company changes in the product's demand a sudden shift in demand for a particular product can pose a business risk incompetent mismanagement management is often incapable of running the company which is significant source of business risk they were unable to achieve the expected goals due to poor planning or planned which increased the risk all of this will result in a decrease in cash flow and an increase in per unit costs natural disasters natural disasters such as floods and earthquakes may cause significant damage to a company and since nature is uncontrollable for humans any damage caused by natural disasters is inevitable and uncontrollable technology usage if a company is financially stable it can invest in heavy machinery and new manufacturing techniques and this stability reduces the per unit cost of the output of products however procuring these technologies may add more financial burden and may affect the business adversely policy changes for businesses government policies are inevitable a sudden shift in a government's monetary and fiscal policies unfavorable to business would result in a loss human factors theft forgery extravagant spending and top-heavy management can all result in business losses how can business risk be mitigated many risks exist in business but they can be mitigated by taking certain precautions management may use strategies to reduce the chances of certain occurrences happening resulting in a loss and all threats cannot be eliminated but they can be reduced as a result strategies that minimize loss are implemented when identifying business goals many businesses fail to consider or accept risk it is critical to define the types of risks that could endanger the company at this stage the risk analysis can be accomplished by an essential exercise such as swot analysis key performance indicators or kpis are a way to track progress and identify problems identifying risks impact kpis and results making a comprehensive list of potential risks is essential so that if something goes wrong with the company can quickly be identified and fixed and when setting the risk tolerance thresholds reliance on an automated tool for alerts and notifications can also help manage risk what is an example of business risk kodak was established in 1892 as a trademark for a camera that the general public could use kodak was a leading manufacturer of non-digital cameras and video recorders and a variety of film products when digital cameras replaced old style cameras on the market the demand for film items decreased and for decades the kodak management refused to acknowledge digital photography as a revolutionary technology that would prove disruptive and one of the high impact threats for kodak in the pre-digital age was that new technology would reduce demand for one of the company's film based products from commercial film cameras to digital x-rays to digital movie making this trend impacted almost every market segment kodak worked in and this risk was not well mitigated and became the reason for kodak's downturn thank you so much for your time watching if you like this information please like share and comment on the video below and subscribe to the youtube channel please press the bell icon to be notified of the latest videos and for regular information and updates please head to the website calcanmedia.com and this is sage for calkin media