Business risk is something that might prevent a business from reaching its business goals. The risks associated with a general business are vast and comprises things that can only be controlled by a business, like a strategy, and few things that are not controllable, like the global economy.
There is a stable relationship between reward and risk. Commonly it is impossible to gain any business without going through any risk. However, risk management’s purpose is not to eliminate the risk.
In some cases, risk management aims to improve the risk-reward ratio while staying within the limit of a business’s tolerance. Here are twenty business risks every business owner should know.
Competitive Risk
Competitive risk is the risk that a competing business will get more growth and leave the other business behind while beating the same business every single time.
Economic Risk
Economic risk is the potential for changes in the economy that might increase a business’s expenses or decrease overall sales.
Operational Risk
Operational risk is the risk of failing in the company’s daily operations, especially in customer service processing. Few definitions of operational risk state that it is the failure to meet the daily tasks. However, processes that are thought to be completed and effective also give a bit of risk.
Legal Risk
With legal risk, the chances are that new laws will cause interruption with the current business or might suffer heavy costs and losses due to an authorized argument.
Compliance Risk
With compliance risk, the chances are that a business will break the rules or guidelines. In many cases, a business might ultimately intend to follow the law but, in the end, violates laws because of ignoring errors.
Strategy Risk
The strategy risk is the risk that comes up with a specific strategy. Though strategies are generally used to improve business, they can also bring about business risks.
Reputational Risk
Reputational risk is the chance of losing sales because of a decreasing reputation arising due to incidents or practices that are considered disrespectful, dishonest, or incompetent. The term is bound to define the risk of confidence loss in an organization instead of a slight decline in reputation.
Program Risk
The program risk is the risk that is associated with a specific business program or project portfolio.
Project Risk
The project risk is the risk that comes up due to a project. Projects’ risk management is a comparatively mature discipline that is protected in chief project management methodologies.
Innovation Risk
Innovation risk is the risk that applies to inventive areas of a business like product research. Such areas might need adjusting your risk management practices to relatively high-risk and fast-paced activities.
Country Risk
The country risk is the exposure to the situations in the countries in which a business operates, like the economy and political events.
Quality Risk
The quality risk is the possibility that a person might fail to meet the quality goals for your products, business practices, and services.
Credit Risk
The credit risk is the risk that comes with clients failing to pay back the amount they owe a business. For many businesses, this is generally related to the accounts’ receivable risks.
Exchange Rate Risk
Exchange rate risk is the risk that occurs when a country’s currency is converted into other currency types; as such foreign exchange rates affect the business’s transactions and assets value. Many international businesses go through such type of risk as they can secure more sales in other countries, but their sales do not generate much revenue on currency conversion.
Interest Rate Risk
The risk that the business will have to pay more on returning the debt with the change in interest rates. As interest rates directly influence the capital cost, ultimately resulting in influencing the profitability of the business.
Taxation Risk
The taxation risk is the risk with the potential for new tax laws or interpretations to result in higher than expected taxation. In some cases, new tax laws can completely disrupt the business model of an industry. The possibility of additional tax laws or changes in the tax higher than expected, and in a few cases, new tax laws can destroy the business’s financial model. They can cause chaos on a financial scale in an industry.
Process Risk
The process risk is the risk associated with a specific process. The process inclines to be focused on risk administration to decrease risks in basic business processes, often giving out reductions in costs and generating additional profits.
Resource Risk
The resource risk is the risk of failing to accomplish the objectives due to a failure of resources like financing or the skilled workers’ labor.
Political Risk
The political risk is the risk of political outcome and events affecting the business.
Seasonal Risk
The seasonal risk is when you own a business whose sales go up only in a specific season, like a ski resort business.
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.
