The causes of business risks may be classified as follows:

(i)    Natural Causes. Human beings have no control over the nature. Certain unforeseen events like heavy rains, famine, earthquake, fire, etc. effect the business adversely.

(ii)    Human Causes. Human causes are also very important causes of business risks. These causes include dishonesty, carelessness and negligence of employs, riots, strikes, etc. Irrational approach of the management or the owners of the business is also a type of human failure which causes business risk.

(iii)    Economic Causes. Economic causes relate to fluctuations in demand and price or changes in the market condition. There may be loss because of price fluctuations, trade cycle, severe competition and unforeseen changes in the techniques of production.

(iv)    Physical Causes. They include all mechanical causes which affect the working of the asset of the business. For example, an explosion in a boiler may cause destruction of equipment and injuries to human beings. Perishable goods may be damaged because of break-down of cooling machine.

(v)    Miscellaneous Causes. Miscellaneous causes of business risk include inefficient management, changes in government polices in regard to foreign trade, licensing, taxation, etc. A slight change in the Government policy may wipe out all the profits of a business undertaking.

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