Question

What is the nature of risk? Are our political & economic systems sufficiently/efficiently accounting for risk?
(please write at least one paragraph)

Answer 1

Business risk is the likelihood that a business will have reduced than expected earnings or experience a loss rather than profit. Many variables affect business risk, including sales quantity, per unit cost, input expenses, competition, and general financial climate and public laws.

1. Arises due to Uncertainties

Uncertainty means uncertainty about what will occur in the future. Common examples of uncertainties are: demand change, public policy, technology, and so on. These uncertainties are attributable to business danger.

2. Essential part of any Business

A risk is an significant company feature. No company can prevent risk although risk degree may differ. Risk may be decreased but not eliminated.

3. Degree of Risk Depends upon the Nature and Size of Business

The degree of danger depends on the sort of company; for instance, a fashion item company carries more danger compared to the standardized products company. Similarly, a large-scale company carries more danger than small business buildings.

There are many services that measure country risk. The appendix provides information on the following providers:

• Bank of America World Information Services
• Business Environment Risk Intelligence (BERI) S.A.
• Control Risks Information Services (CRIS)
• Economist Intelligence Unit (EIU)
• Euromoney
• Institutional Investor
• Standard and Poor's Rating Group
• Political Risk Services: International Country Risk Guide (ICRG)
• Political Risk Services: Coplin-O'Leary Rating System
• Moody's Investor Services

ICRG compiles monthly information on a multitude of political, financial and economic risk variables to calculate risk indexes in each of these classifications as well as a composite risk index. Five financial variables are used, 13 political factors and 6 economic variables. A numerical rating within a defined range is allocated to each factor. For each factor, the designated permissible range represents the weight assigned to that factor. A greater score shows a lower risk.

Policy results for risk assessment are based on the subjective analysis of accessible data by employees. Economic risk assessment scores are based on objective quantitative data analysis and financial risk assessment scores are based on analysis of quantitative data