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