Risk Management

Risk Management

The business risk can be defined as a risk or the probability of loss in the business or the probability that the profits of the company may fall or decrease. There could be numerous risks that can influence the profitability or the success of a business. The factors which can influence the business are; the property, market, employee, sales volume, the economic situation of a country where the business is operating, government regulations, competition and customers. This paper will discuss the four of the above mentioned risk factors that can influence the business and these four factors are: property, market, employee, and customer.

Property Risk

The property risk is basically the risk associated with the investment in the real estate. It is the probability of financial loss that a company may face. A company can face property risk through liability; problems arise by the partners that make a force sale, theft, fire, buying of a property with an imperfect title and legal issues. The owner of the business must protect the building and property of the business because it is very important for the business survival. The property of a business includes; the building of a business, plant and machinery, and other assets owned by the company. Companies usually insured their assets to avoid the property risk. It can be said that the intensity of risk in property risk varies on different assets (Stowe & Jeffery, 2008). Some assets have low to moderate risk whereas some assets have high risk. Mostly the building of a company is at low and moderate risk. Some assets are at high risk, for example the inventory and raw material or some time the finished goods are at high risk. The risk premium charged on them is also high.

Employee Risk

Another kind of risk that is very crucial for the business is the employee risk. It can influence a business in numerous ways. Employees are considered as a valuable asset to the company. Moreover it is the efficiency and effectiveness of the employees that makes the business successful. There could be four kinds of employee risk; a firm can face employee performance risk. One of the reason for the employee poor performance is the over working. Another case of employee risk that a company may face is losing a key staff member, so value employee retention is another risk for the business.

In many ways some risks are interrelated to each other. Sometimes in businesses where the employees interaction is more with the customers and customers are more loyal to the employee of a particular industry, in these situations the employee's retention is very important and the business can face losses if the employee leaves the company. It could be said that in some industries customer risk and employee risk is interrelated.

Market Risk

Market risk can be defined as the possibility of losses resulting from fluctuations in the market values of positions held by the Group or the company, including the risks of transactions subject ...