Business Risks

Business Risks

Introduction

The nature of risks differs from business to business. In order to understand basic concept of risk, it is essential to know different type of risk that has direct impact on business operations and business investment. These risks has been divided into Systematic Risk and Unsystematic Risk which has further divided into Market Risk, Interest Rate Risk, inflation or Purchasing Power Risk, Business Risk, Credit Risk, Exchange Rate Risk and Country or Political Risk. For managing and mitigation of such risks, different techniques and policies are used by companies.

The focus of this paper is to analyze risks via articles for property, market, employee, and customer risk and discover risk mitigation techniques or policies for each category of risk.

Discussion

Property Risk

Property Risk refers to likelihood of the financial loss that occurs due to the owning investment in real estate. This risk usually takes place with things such as legal issues, partner problems, fire, theft or loss of rental income and busing property with faulty title. In order to mitigate this risk, the best strategy according to different articles is purchasing insurances against property. Beside this, track on market trend, demand and supply for a particular area and regular inspection of the property can avoid risk in property (Pihera, & Andreoli, 2004).

Market Risk

Market risk refers to that risk which is affected by fluctuation in the market. In order words, investment value decline due to market conditions. In order to mitigate this risk, company can use different strategies and tools such as using derivatives instruments and portfolio diversification (Cummins, Phillips, & Smith, 1998). These are most effective and mostly used by companies for avoiding market risks. Market risk has direct connection with company's profitability. Since few market risks cannot be eliminated rather they can just be monitor. For such ...