Business environment is affected by various internal and external factors.

These factors are not static , rather these are constantly changing. The changing factors carry with them both opportunities and risks or uncertainties which can make future of business.

According to keith Davis- Business risk is a concept used by auditors and managers to express concern about probable material effects of an uncertain environment on achieving established objective

According to Arthur M.Weimer Business risk can be defined as any unfavorable changes in external or internal component of business environment which may pose threat in achieving business objectives According to Bayard O.Wheeler Business risk refers to uncertainty with the expected outcomes for a Business Venture.

Internal Risk Operating Risk/Micro Level Risk 1. Disruption in supply of funds 2. Increase in competition 3. Change in taste ,Preference of Consumers 4. Problem with Market Intermediaries 5. Public Resentment

 1. 2. 3. 4. 5. 6.

General Environment Risk/Macro Level Risk Economic Risk Political Risk Technological Risk Natural Risk Global Risk Social and Cultural Risk

Internal Risk-Internal Risk arises from unexpected events with in business enterprise. Types Occurrence of strike Lockout Financial crunch Loss due to damage of property

Loss by fire , theft, accident , sudden failure of machinery and equipment

Identify the risk Identify the possible effects of various risks. Understanding how to Respond Monitoring the effectiveness of Risk Management Process.

Risk are the events or conditions that may occur & whose occurrence ,if it does take place , has a harmful or negative impact. Risk is manifested in the probability of loss or damage to a business firm

LEGAL RISK : Changes in Law REGULATORY RISK : Regulatory design & changes POLITICAL RISK : Resulting from political changes SOCIAL RISK : From Social Attitudes NATURAL RISK : Natural Disasters ECONOMIC RISK : Economic Changes

Country risk analysis is basically concerned with the performance of an economy and the behavior of the Government and the institutions which determine the Business Environment

Collection of risks associated with investing in a foreign country is called as country risk. these risk include political risk, exchange rate risk, economic risk.

It is practiced by govt officials as a way to interpret or anticipate the behavior of other govts. Senior managers of MNCs before taking decisions. Promote investment & jobs in different sectors.

Mass riots and civil wars , widespread terrorism in the nation. Political instability Widespread corruption Changes in economic policies Bad industrial relation Increase in taxation rates Rigid labor laws and poor work culture

Rigid labour laws and poor work culture. Huge deficit in government budget. Rigid currency control. Weak financial market institutions Slow judicial machinery Poor relations with neighboring nations Weak infrastructure like shortage of manpower, lack of efficient transport system. Bad weather conditions

Monetary Policy-is the process by which the govt, central bank, or monetary authority of a country controls the supply of money, aviability achieve of money & rate of interest to certain objectives. Fiscal Policy Import controls

Political environment is set by the POLITICAL SYSTEM, THE CONSTITUTIONAL FRAMEWORK, EXTERNAL POLITICAL RELATIONS, FUNCTIONING OF THE GOVERNMENT, ROLE AND BEHAVIOR OF VARIOUS POLITICAL PRESSURE GROUPS

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GENERAL INSTABILITY RISK Due to change in the political system with a change in Govt. Due to social revolution, normal election process etc Due to poor Governance, poverty and exploitation
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2. OPERATIONAL RISK Restriction on the production, marketing, finance, human resource management or international business 3. OWNERSHIP RISK It arises from the probability that the govt. might take actions that may lead to erosion in ownership or control in the business firm.

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2. OPERATIONAL RISK Restriction on the production, marketing, finance, human resource management or international business 3. OWNERSHIP RISK It arises from the probability that the govt. might take actions that may lead to erosion in ownership or control in the business firm.

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RISK AVOIDING STRATEGIES Avoiding politically sensitive products Avoiding sensitive regions Contractual agreements Tie-up with other Firms 2. RISK SHIFTING STRATEGIES Risk can be shifted to other parties through Insurance
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3. RISK REDUCTION STRATEGIES Establishing a risk-assessment system Developing the local economy Local Equity participation Good Corporate Citizenship Maintaining Good Political Relations

Identify the risk Identify the possible effects of various risks. Understanding how to Respond Monitoring the effectiveness of Risk Management Process.

Improving decision making and making appropriate plans policies and strategies. Minimizing the amount of loss. Preventing serious disasters.

Substituting the risky project Scientific forecasting Technological research Credit screening Inventory control Effective packing Safe work environment Security arrangements

Fire control equipment Coordial relations Social responsibility measures insurance