Causes and Types of Business risks

APRIL 27, 2020
DAY 5


Thank you for logging in. Good morning boys! I hope you all have understood the meaning of business risks and its features till now. Let us now start with the causes and types of business risks.

PLEASE NOTE THAT ON 30th APRIL( DAY 3) , THERE WILL BE SHORT ASSESSMENT FROM CHAPTER-1 (excluding History Of Commerce). 

LEARNING OUTCOMES: At the end of the lesson, students will be able to:
a) Explain the causes of business risks.
b) Identify the types of business risks.

YOU MUST WATCH THIS SHORT VIDEO IN ORDER TO RELATE IT WITH THE TOPIC WE ARE DOING TODAY:

NOW TAKE DOWN THE NOTES IN YOUR REGISTER:



Q .17 Explain the causes of business risk . (4)
Ans- 1.Natural Causes-
a) Natural causes like flood, earthquake, etc lead to loss of life and property resulting into loss of business opportunities.
b)This type of risk is beyond the human control that can be minimised with insurance.
2.Human Causes-
a) Human causes like power failure, strikes or lockouts, managerial inefficiency, etc lead to loss of productivity,  increase in costs and decrease in business profits.
3. Economic Causes-
a) Economic causes like fluctuation in demand due to change in prices, taste, preferences or market conditions increase the possibility of risk.
b) Increased competition, change in technology or production methods may also result in losses.
4. Other Causes-
a) Possibility of business risk increases due to political instability, terroism, mechanical failures, fluctuations in exchange prices, etc.

Q.18 Explain the types of business risks. ( 3)
Ans- 1. Speculative Risks-
a) They are the kind of risks which have the possibility of gain as well as possibility of loss. They are the result of market conditions or economic causes like change in demand, change in technology, change in government policies, etc.
2. Pure Risks-
a) They are the type of risks where business suffers loss only if the risk occurs. Non occurence of such risks leads to absence of loss. Example- Loss due to fire, theft, strike, etc.

Questions-

Q.1 Explain two characteristics of business which involve possibility of loss. (3)
Q.2 Risk in business is not by choice but a compulsion. Comment. (1)
Q.3 Explain why Commerce is considered as the backbone of industry and other business activities. (3)

God bless you all!