Business risk means possibility of some unfavorable occurrence. It may be defined as the possibility of an adverse deviation form a desired outcome that is expected. Since an adverse deviation form a desired outcome may be viewed as a loss, risk may also be defined as the possibility of loss. A businessman may have to bear many types of risks such as: (a) Loss of business assets, (b) Loss of income, and (c) Liability towards the third parties.

According to B.O. Wheeler, “Risk is the change of loss. It is the possibility of some adverse occurrence.” There is always a possibility of loss n business event through the businessman exposed to it may no beware of it. The possibility of loss need not be measurable, but it must exist.

The following important pints should be noted with regard to risk:

(i)    There is existence of possibility of loss, even though the individual or group or individuals exposed to the possibility of loss may not be aware of it.

(ii)    The possibility of loss need not be measurable, but it must exist.

It is not uncommon for the terms ‘peril’ and hazard’ to be used interchangeably with each other and with ‘risk’. However for clarity in thinking, it is important to distinguish the meaning of these terms. A peril is a contingency which may cause a loss. We speak of the peril of fire, windstorm, or hail. Each of these is a cause of loss that occurs. But a hazard is a condition that crates or increases the chance of a loose arising from a peril. For example, a condition that makes the occurrence of collisions more likely is an uneven street. The uneven street is the hazard and the collision is the peril. Bothe the terms are more closely related to chance or probability than they are to risk. The chance of collision is higher during night or bad weather. In such a situation, the risk of loss is not necessarily higher or lower, because according to our definition risk is the possibility of an adverse devotion for desired outcome that is expected.

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