Questions and Answers
What is the term for the possibility that a business may not succeed?
risk
What are the general classifications of business risks?
hazard, operational, strategic, and financial
A hurricane that destroys a business is an example of a(n) __________ risk.
hazard
A garden store customer tripped over a plant, fell, and sued the store for damages. This is an example of a(n) __________ risk.
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A union strike that stops production at a manufacturing plant is a(n) __________ risk.
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What category of business risk includes production problems and incompetent employees?
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When a rival's product on the market reduces sales of your company's product, what type of risk is this?
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Financial loss from investing time and money to comply with accounting standards is an example of which strategic risk?
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Which of the following is a pure business risk?
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Which of the following is an example of a business risk that cannot be covered by insurance?
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Management decides to hold its annual meeting in one U.S. city rather than another because of crime in that city. This is an example of __________ the risk.
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Having well-planned buildings and providing effective employee training are ways that a business can __________ business risks.
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Carefully selecting goods or services to sell is an example of handling business risks by __________ the risk.
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Careful screening of credit customers is an example of handling business risks through?
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The act of reducing or removing risks by shifting the risk factor to another person or business is referred to as __________ risk.
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Contractual agreements such as guarantees, surety bonds, and leases are examples of business risks being handled through?
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Requiring a contractor to purchase a surety bond is an example of handling business risk by __________ the risk.
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Businesses can protect themselves from the risk associated with lost shipments by?
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When a business keeps a risk because management is unaware of it, the business is _________ the risk.
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If a risk is small in terms of money, a business may decide to __________ the risk.
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Study Notes
Business Risk Overview
- Business risk refers to the potential for a business to fail.
- Classifications of business risks include hazard, operational, strategic, and financial.
Types of Business Risks
- Hazard Risk: Examples include natural disasters like hurricanes or accidents like customers tripping in stores.
- Operational Risk: Involves issues like union strikes or production problems caused by poor employee performance.
- Strategic Risk: Arises from competitive market actions affecting sales; influenced by the rival's products.
- Financial Risk: Includes risks that cannot be insured, such as fluctuations in interest rates.
Managing Business Risks
- Avoiding Risk: For example, choosing a safer location for annual meetings due to crime rates.
- Preventing or Controlling Risk: Strategies include effective training and well-planned facilities.
- Transferring Risk: Shifting risk via contracts, insurance, surety bonds, or guarantees to mitigate exposure.
Risk Handling Practices
- Carefully selecting products involves preventing risk through informed decisions.
- Screening credit customers is a preventive measure against financial risks.
- Purchasing transportation insurance helps protect against losses from shipments.
Retaining Risk
- A business may choose to keep a risk if it’s deemed minor or if management is unaware of its existence.
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Description
Test your knowledge on the various concepts of business risk with these flashcards. Learn about classifications such as hazard, operational, strategic, and financial risks. Understand the implications of these risks in real-world business scenarios.
