Business Risk Analysis
Business risk can be analyzed between external and internal risks:
External risks:
- Changing legislation (e.g. minimum wage)
- Changing interest rates (especially with highly geared companies)
- Changing exchange rates
- Public opinion, attitudes, fashions (e.g. environmental factors)
- Price wars initiated by competitors (e.g. supermarkets)
- Import competition (e.g. the textile trade)
- Untried technologies and ideas (e.g. dot.com traders)
- Natural hazards (e.g. fire or flood or effects of global warming)
- Bad debts
- Litigation
- Environmental matters
- Inflation
- Political factors
Internal Risks:
Internal risks can also harm the company. These comprise:
- Failure to modernize products, processes, labor relations, marketing resulting in loss of competitive edge.
- Employees (e.g. ineffective recruitment or training policies)
- Board members (e.g. ineffective corporate governance)
- The process of dealing with suppliers or customers
- Excessive reliance on a dominance chief executive (thereby weakening internal control)
- Inadequate cash flow and the risk of corporate failure
- Inappropriate gearing (resulting in a lack of financial efficiency)
- Related parties resting in inappropriate terms of trading
- Inappropriate acquisitions and poor future prospects
- Overtrading resulting in cash shortages
- Excessive reliance on one of a few products, customers, suppliers
- Internal control weaknesses
- Computer systems failure and loss of records
- Fraud