Question: Critically evaluate the components which are widely recognised as contributory factors to the concept and occurrence of risk within a business and societal setting and acknowledges economic and legal implications.

Expert answer

Businesses face many risks that could potentially have negative impacts on their operations. While some risks are beyond the control of businesses, there are a number of factors which contribute to the concept and occurrence of risk within businesses. This essay will critically evaluate some of these factors, as well as discussing the economic and legal implications of risk.

One factor that contributes to the concept of risk within businesses is uncertainty. Uncertainty refers to the lack of knowledge or clarity about something. In business, uncertainty can arise from a variety of sources, including changes in technology, economic conditions, customer preferences, etc. This lack of certainty can lead to businesses making decisions that are not in their best interests, which can ultimately result in losses for the business.

Another factor that contributes to risk is the possibility of loss. While businesses strive to make profits, there is always the possibility that they may lose money instead. This possibility of loss can arise from a variety of sources, such as changes in the market, competition, or the business itself. If a business is not prepared for these potential losses, they could find themselves in serious financial trouble.

In addition to uncertainty and the possibility of loss, another factor that contributes to risk is exposure. Exposure refers to the likelihood that a business will be affected by a particular event or circumstance. For example, if a business is located in an area that is prone to natural disasters, it has a higher exposure to risk than a business located in a more stable area.