Question

looking at the two categories generally classified with business risk which are internal the controllable ones and external not controllable develop an analyst of how financial management techniques or policies can be used to mitigate each of the risk

Answer 1

Internal risk are faced by the company during its normal course of operations, the risk cane be forecsated with some reliability .

there are three type of internal risk that the company can face are,

human risks- union strikes ,dishonesty by the employees, inefficien t management etc

Technological risk - outdated systems

physical risk- loss of damage to the assets of the company

A company can reduce internal risk by hedging the exposure to thse risk ie can obtain credit insurance for their accout receivable , providing protection to their customers not paying their bills.

External risk factors come due to economic events hat arise from outside the corporate structure .it can not be controlled by the company,therefore it is hard to reduce the associated risks

there are three type of external risks

economic risk - changes in market conditions

Natural risk - natural disaters

political risk- changes in the conditions of the political environment in the country.

to manage external risk , some credit insurance can protect against political wars .

The best way to manage internal and external risk is to maintain an adequate level of capital so that company can carry creit insurance.

Company should choose a adequate capital structure that has a lower debt ratio to help ensure it can meet its financial obligations all the time.