The paper will explain the types of risks and incidences that business owners can face throughout operations: property risk, market risk, employee risk and customer risk, all of which can affect a business. While risks are not entirely unavoidable, this is not to say that business owners cannot mitigate the risks and take notice of them being they even have the chance to occur. Businesses can face one or more of the types of risks, but this is dependent on the industry in which the business operates as well. Risk is a part of everyone’s life, whether an employee or a business owner. Risks must be taken to grow and develop, even if that risk ends in an unfavorable outcome. The risk management process is not an easy one by any means, but it would do well for business and firm owners to try to preemptively prevent a problem before it even occurs with the proper oversight when shadowing and supervising a business.

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Entrepreneurship will always involve a degree of risk, whether large or small. Business owners face several odds, such as the success of a business in a certain period of time, the scope of the market, supply and demand, making bad business decisions, negligence, etc. However, these risks can be minimized and sometimes avoided through the process of risk management. Risk management involves “the preservation of the assets and earning power of the business against the risk of loss.” While risks cannot be entirely eliminated, small and large business owners can at least mitigate the risks to the best of their ability.

Business owners can incur several types of losses that can cause a business to shut down, so it is best to deter time. Before this happens, the entrepreneur must first identify the business risk, which can be unique to industries, but also fall within four main categories: property, market, employee and customer. Each business has its own set of risks that can be pervasive enough to impact the business and these can differ among industries. For example, in the construction industry, the property risks and employee risks may be the most common ones as they deal with construction laws, regulations and codes, as well as the high importance of employee safety. In manufacturing, one of the biggest risks is market-related. The customer may change their mind about their attitudes towards a product even if it is still in development, rendering the process and the product itself obsolete. This speaks to the severe fluctuation of the market and the fickle nature of consumers.

One type of risk that business owners can face is property risk, which can create problems such as liability, accidents, intentional harm to a business structure, partner problems that can force the sale of a business, liability, etc. Business owners often own property out of which they provide goods and services. A property can incur a direct loss, an indirect loss or losses arising from external expenses that cover other losses or are just for upkeep of the property. Business owners can mitigate this risk by ensuring that their properties and structures are covered by insurance, up to date in meeting safety and health codes, ensuring that the property is the best place to build prior to construction, etc. The building it one of the first components of having a business and protecting that structure should also be the first priority. Business owners should protect the property from the top to the bottom with a coverage policy that can protect assets large and small.

Market risk involves the risk of business losses because of movements in market prices. Market risk can involve currency risk, interest risk, commodity risk, etc. Market risks occurs due to price changes, which refers to price volatility, again speaking to the ever-changing nature of the market. Market risk can include recessions, political turmoil, disasters, terrorist attacks and any and all other incidents that will have financial impact on a business, entity or an institution; it also can concern the consumers that are purchasing within that market. Fluctuating consumer trends and interests can always change the nature of a market. Ways that businesses can combat market risk is through diversification and security of its money, as well as market research to keep up with consumer trends, purchase decisions and the motivations behind why people make the decisions that they do. A competitive analysis would also do a firm well to see what the competition is—and is not—doing in order to succeed. If there is no market adoption or demand for a product, the business will not survive and could possibly fall prey to the five-year curse that says that businesses will shut down within five years of operations.

Employee risk has to do with a business’s personnel, the employees that keep the business moving. Efficient business owners will do what it takes to have satisfied employees that also feel appreciated at work, as this is beneficial for business, productivity and output, all of which when are optimal, they lead to profitability. Employee risk involves all of the things that an employee can do that can damage the business in some way. This can include theft, human error, deception, fraud, embezzlement, etc. Internal things that affect employees in their personal lives can also have an effect on their work and thus, the business’s operations. A good business owner would look to mitigate employee risk with a culture of compliance, cooperation, collaboration and productivity. A business owner should fairly compensate their employees, understand that they have lives outside of work and ultimately value the work that they do for the company (Davis, 2015). A disgruntled employee can make for bad business, and in extreme cases that have been seen before, create dangerous situations.

Finally, customer risk concerns the relationship between the business and the customer, whether the customer is a current consumer or a potential consumer. Customer risk can be mitigated by forming meaningful relationships with customers and having total transparency as a brand or a business. A big customer win is what each business wants as it contributes to awareness, loyalty and ultimately, profitability. Without the proper attention and concern placed on a customer, businesses can suffer. A relationship with a customer goes beyond the bottom line, but good customer relationships can bring many others on board, particularly through word of mouth. Business owners can cut the effects and customer risk by understanding the potential and current customer bases and figure out how, when and why they make their purchases and purchase decisions. Owners should position the business as something that consumers need, but not just want. They should engage with customers and have meaningful, even if short, dialogue to show that there is more to the brand than money and a logo.