Business Risks and Insurance — Flashcards

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Business risk means the probability of losses or inadequate profits due to uncertainties or unexpected events beyond control. It is the possibility of an unfavourable occurrence in business.

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A businessman has to bear three kinds of risks: loss of assets, loss of income due to accident, death or ill health, and liability of loss towards a third party.

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There can be no business without risk. Every business activity involves uncertainty, and profit is the reward for taking that risk.

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The degree of risk depends on the nature and size of business. Smaller firms usually face less risk than larger firms, and some businesses are more risky than others. Competitive business carries more…

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Internal risks arise from factors within the business firm. They include inefficient management, negligence of staff, poor working conditions, risk of financial liability, and industrial unrest.

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External risks arise from factors outside the business and beyond management control. They include natural causes, human causes, economic causes, physical causes, and government policy.

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Inefficient management can lead to poor planning, weak organisation, insufficient capital, faulty decisions, and poor control. These increase cost of production, reduce quality, and waste resources, c…

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Negligence of staff can cause fire, accidents, damage to goods, and poor maintenance of machinery. Poor working conditions can reduce efficiency, cause injury or death, and lead to dishonesty, misappr…