Understanding Business Risk

These flashcards cover the key concepts related to business risk, including definitions, classifications, and risk management strategies.

What is business risk?

The possibility of loss (failure) or gain (success) in a business.

What are economic risks?

The possibility of loss or failure that occurs as a result of the economy.

What are natural risks in business?

The possibility of loss or failure from natural events.

What are human risks?

The possibility of loss or failure due to human error.

What is the difference between pure risks and speculative risks?

Pure risks have two possibilities (loss or no loss), while speculative risks have three possibilities (loss, no change, or gain).

What is a risk-response strategy of avoidance?

Choosing not to do something that is considered risky.

What does risk reduction involve?

Trying to reduce the chance of loss or severity of loss.

What does risk transfer mean?

Moving the impact of a risk to someone or something else.

What is risk retention?

Assuming responsibility for the risk rather than transferring it.

Why take a risk in business?

It's the only way to be successful, but not every risk is a good idea.