Cause of Business Risks

Business risks arise from a variety of causes, which are classified as follows:

• Natural causes: Human beings have little control over natural calamities such as flood, earthquake, lightning, heavy rains and famine, which can cause loss of property and income.

• Human causes: These are unexpected events arising from people — dishonesty, carelessness or negligence of employees, stoppage of work due to power failure, strikes, riots and management inefficiency.

• Economic causes: These are uncertainties relating to demand for goods, competition, price, collection of dues from customers, and changes in technology or method of production. Financial problems — such as a rise in the interest rate on borrowings or the levy of higher taxes — also fall here, because they raise the unexpected cost of running the business. …