The Different Categories of Business Risk

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There are numerous categories encompassed by the term ‘Business Risk’. Like any other risk type, understanding business risks is quite important for every business to garner profits instead of facing losses. A business risk is a universal risk type; this means that every business in the world faces business risks. Therefore, it is imperative to understand the different categories of business risk in order to create the appropriate strategies.

Compliance Risk:

Compliance risk is the type of business risk which is directly associated with the business laws of a state. This means that a business is always at the verge of breaching laws. Therefore, a compliance risk strategy is made to counter such situations.

Strategic Risk:

Every business has a business strategy backing it up. Without proper strategies and plans, no business in the world can survive. However, when there are changes which a business adopts, there are also new strategies made and these new strategies pose risk to the business’ current situation.

Economic Risks:

The fluctuation in the economic stability of a state or country can bring adverse consequences for businesses. Therefore, the more stable the economy is, the lesser economic risks businesses will face.

Operational Risks:

In simple words, operational risks are the ones associated with the functions or the operations of a company. This can include the IT infrastructure of a business, its internal procedures, supply chains, etc.

Financial Risks:

Financial risks are the deadliest type of business risks for any business. Loans, debts, investments and the like are the areas which businesses will meet up with financial risk threats. Remember – financial risks are not limited just to a company’s function. Each and everything that a business does is directly or indirectly related to financial risks. Therefore, the category is the most important one to work on for any business in today’s world.

Further reading: Corporate Governance | Audit | Performance Improvement

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