Corporate Risk & Valuation · Entry 05 of 71

What Is Business Risk?

Operating challenges that impact corporate profitability

Core Definition

Business Risk refers to the possibility that a company will experience reduced profits or financial losses due to uncertainties and challenges in its operations.

Key Drivers

1. Can be caused by fluctuating markets, competition, or operational issues: Variations in raw material prices, consumer demand, or intense rivalry from new entrants.
2. Impacts the company's profitability and ability to continue its operations: If business risk is too high, operating cash flow may not cover fixed overhead costs.