Risks & Uncertainty Flashcards

All 9 cards in this deck

Name three risks a business faces when it launches a new product or expands.

Business failure, financial loss and loss of customers.

Why do all businesses face uncertainty?

Because factors outside their control change — technology, the economy and consumer tastes.

Give two reasons why an entrepreneur is willing to accept risk and run a business.

The chance to earn profit, and independence — being their own boss (also personal satisfaction from a successful idea).

How does market research help a business minimise risk?

It finds out what customers want before money is spent, so the product is less likely to fail.

How does business planning help a business minimise risk?

It sets out objectives, costs and forecast revenue in advance, so problems are spotted early and finance is easier to obtain.

How does insurance help a business minimise risk?

The business pays a premium so that an insurer covers the cost of losses such as fire, theft or accidents.

How does diversification help a business minimise risk?

Selling a range of products or selling in different markets means poor sales of one product do not cause the whole business to fail.

True or false? Complaints about a new product can only damage sales of that new product.

False. Poor reviews damage the reputation of the whole business, so sales of its existing products can fall too.

True or false? Launching a cheaper online version of a service guarantees a business will stay ahead of its rivals.

False. In a competitive market there is nothing to stop other businesses offering the same service.