Types of Business Risks – Business risks can be defined as possible events and can cause losses and can even cause bankruptcy.
This is where the importance of risk management is to identify what is wrong, evaluate risks that must be addressed and implement strategies to deal with these risks.
Various business risks
By identifying risks first, your business will be better prepared and have a way to deal with these risks.
The type of risk that can result in losses can be divided into 2 (two), namely pure risk (Pure Risk) and speculative risk (Speculative Risk).
The following is the explanation:
1. Pure risk
pure risk is the risk that occurs and certainly can result in losses and if the risk does not occur then it does not cause losses or profits.
With the occurrence of pure risk, this can lead to several conditions for the company, namely loss, bankruptcy or break-even.
This type of pure risk can be divided into 3 (three) types, namely
a. Risk of physical assets
Understanding the risk of physical assets is a risk that can cause losses to company assets such as floods, fires, earthquakes, etc.
b. Employee risk
The meaning of employee risk is the risk posed by employees in companies such as workplace accidents, sick employees, etc.
c. Legal risk
Legal risk can be caused by contracts that do not work with planning. Examples of contract violations between companies can result in losses.
2. Speculative risk
Speculative risk is a risk that has two possibilities, namely loss or profit.
There are 4 (four) types of speculative risks, namely:
a. Market risk
Market risk is the risk that arises because of changes in market prices such as the value of stock prices that always experience movement and can cause losses if the price drops.
b. Credit risk
The emergence of this risk is caused by the failure of the company to fulfill its obligations to other companies, for example, bad loans.
c. Liquidity risk
The company’s inability to meet cash needs can be called liquidity risk.
For example, the amount of cash is limited so that the company is unable to pay debts on time.
This can make a company have to sell its assets to fulfill its obligations.
d. Operational risk
This risk is the risk that results from operational activities that are not going as well as an operational and administrative business producer.
To overcome this risk, you must always check operations alternately, prioritize risks and set standards for dealing with these risks.
In addition to the above types of risks, various business risks can be shared according to their control.
The following are 2 (two) kinds of risks based on the control, namely:
1. Risks that can be controlled
Risks that can be controlled are a type of risk that can still be overcome or controlled before the company loses.
Usually, this type of risk can be predicted and suspected so that the company can still control it.
When faced with this risk, the company must immediately find out the cause of the risk.
They must immediately make improvements to the causes of risks that arise or eliminate these causes and replace them with better ones.
2. Risks that cannot be controlled
This type of risk is a type of risk that is unpredictable and predictable so that this type of risk cannot be controlled by the company.
Examples of uncontrolled risks include fraud, fire, natural disasters or events that no one wants.
Inevitably, the company must face this type of risk and must find the best solution to overcome it.
Such is the discussion Types of Business Risks in Risk Management.