Business Risks

Jun 21st, 2015
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In the pursuit of any objective, one has to reckon with risk. Individuals and firms must face the prospect of either gaining or losing in their investments. For every transaction made, a corresponding amount of risk is present. Yet, even with such uncertainties, businesses move on.

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INTRODUCTIONBusiness RisksIn the pursuit of any objective, one has to reckon with risk. Individuals and firms must face the prospect of either gaining or losing in their investments. For every transaction made, a corresponding amount of risk is present. Yet, even with such uncertainties, businesses move on. One can only imagine the ill effects on the economy once the firms decide to cease operations for fear of obtaining losses.DEFINITION OF RISKRisk may be defined in two ways. First, it may be viewed as the variability in possible outcomes of an event based on chance. Thai is, the greater the number of likely different outcomes that may occur, the greater the risk will be. Examples of no-risk or low-risk investments are those made for the purchase of government bonds. Conversely, if an investor knows that he will surely lose in his investments; there is also no risk involved. Risk also refers to uncertainty associated with an exposure to loss.METHODS OF HANDLING RISKExperiences have led mankind to adopt ways of handling risk. The methods are more pronounced when applied to business finance. These methods are the following:1. Risk may be avoided;2. Risk may be retained;3. Hazard may be reduced;4. Loss may be reduced5. Risk may be shifted; and6. Risk may be reduced.A businessman, who wants to avoid the risk of losing his building to fire, may do so by simply avoiding the ownership of one. In fact, there are ways of avoiding risk. One of them is through le

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