Business Organization Risk

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A Business Organization Risk is an organizational risk faced by a business organization that can hinder business goals.

References

2024

  • Perplexity
    • Business Organization Risk is a broad concept that encompasses various internal and external threats to a company's goals and operations. Let's break this down further and explore some key aspects:
    1. Types of Business Organization Risks

1. Economic Risks: 

  - Market fluctuations
  - Currency exchange rate volatility
  - Economic recessions or downturns

2. Regulatory Risks: 

  - Changes in laws and regulations
  - Compliance issues
  - Licensing and permit requirements

3. Operational Risks: 

  - Supply chain disruptions
  - Equipment failures
  - Human errors or misconduct

4. Technological Risks: 

  - Cybersecurity threats
  - Technological obsolescence
  - Data breaches

5. Market-related Risks: 

  - Changing consumer preferences
  - Increased competition
  - Shifts in market demand
    1. Mitigation Strategies

1. Diversification: 

  - Product diversification
  - Geographic diversification
  - Customer base diversification

2. Insurance: 

  - Property and casualty insurance
  - Business interruption insurance
  - Liability insurance

3. Planning: 

  - Risk assessment and management plans
  - Business continuity plans
  - Disaster recovery plans
    1. Examples of Business Organization Risks

1. Regulatory changes: New environmental regulations affecting manufacturing processes 2. Natural disasters: Hurricanes or earthquakes disrupting operations 3. Technological advancements: Emergence of new technologies making current products obsolete 4. Economic downturns: Recession leading to decreased consumer spending 5. Cybersecurity breaches: Hacking attempts compromising sensitive data

    1. Differences from Public or Non-profit Organization Risks

While there are similarities, business organization risks differ from those faced by public or non-profit organizations in several ways:

1. Profit motive: Businesses focus on financial returns, while public and non-profit organizations prioritize social impact or public service.

2. Funding sources: Businesses rely on revenue and investments, while public organizations depend on taxes and non-profits on donations and grants.

3. Stakeholder expectations: Businesses answer to shareholders, while public and non-profit organizations have diverse stakeholders with varying interests.

4. Regulatory environment: Businesses face different regulations compared to public or non-profit entities, often with more focus on financial reporting and consumer protection.

5. Competition: Businesses typically face more direct market competition than public or non-profit organizations.

2024

  • (Wikipedia, 2024) ⇒ https://en.wikipedia.org/wiki/Business_risks Retrieved:2024-7-17.
    • The term business risks refers to the possibility of a commercial business making inadequate profits (or even losses) due to uncertainties - for example: changes in tastes, changing preferences of consumers, strikes, increased competition, changes in government policy, obsolescence, etc. Every business organization faces various risk elements while doing business. Business risk implies uncertainty in profits or danger of loss and the events that could pose a risk due to some unforeseen events in the future, which causes business to fail. For example, a company may face different risks in production, risks due to irregular supply of raw materials, machinery breakdown, labor unrest, etc. In marketing, risks may arise due to fluctuations in market prices, changing trends and fashions, errors in sales forecasting, etc. In addition, there may be loss of assets of the firm due to fire, flood, earthquakes, riots, or war and political unrest which may cause unwanted interruptions in the business operations. Thus business risks may take place in different forms depending upon the nature of a company and its production. Business risks can arise due to the influence of two major risks: internal risks (risks arising from the events taking place within the organization) and external risks (risks arising from the events taking place outside the organization):
      • Internal risks arise from factors (endogenous variables, which can be influenced) such as:
        • human factors (talent management, strikes)
        • technological factors (emerging technologies)
        • physical factors (failure of machines, fire or theft)
        • operational factors (access to credit, cost cutting, advertisement)
      • External risks arise from factors (exogenous variables, which cannot be controlled) such as:
        • economic factors (market risks, pricing pressure)
        • natural factors (floods, earthquakes)
        • political factors (compliance demands and regulations imposed by governments)
    • Though corporate entities may have an image of risk aversion, they may continue to stake their reputations and indulge in their gambling propensities by sponsoring competitive sports teams. Many business risks can be related to one another. With the introduction of the Coronavirus in 2019, many businesses fell victim to a lot of risks as a result of the damage to the market. A lot of internal risks arose including the much-needed transition to online communication, via Zoom, etc., within a business. A specific example of external risks can be highlighted by the change in the stock market in early 2020. Between late February to late March, out of the 22 stock market trading days, there were 18 drastic stock market jumps. Stock market jumps can ultimately cause stocks to have lower stability and higher volatility. The uncertainty of whether or not a stock is secure indicates a risk for any certain business.
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