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Study of Microeconomics

There are two main branches of Economics – Microeconomics, and Macroeconomics. These two branches have further sub-disciplines and topics that are very important parts of academic curriculum. Students are taught on various topics that are very closely related to Microeconomics and which help them to understand the concept of this major subject well.

Risk Management is an important topic in the subject of Microeconomics. As we all know, there is a risk in every business. Every business entrepreneur has to undertake some amount of risk in business.

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How can risk be described?

Risk can be defined as a probability or a potential threat to the business. Businesses, whether large-scale or small-scale, are always exposed to financial risks. Some amount of investment is done in every business, and there is no guarantee that sufficient return on investment will come.

There is a probability that at the end of a financial year, the actual return on investment can be less than the expected return, and this is called financial risk in business. But, the entrepreneur has to take these risks to run their business because if there is no risk, there is no gain.

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What is risk assessment?

Uncertainty is there in every business. Uncertainty is a factor that is unpredictable and uncontrollable. The outcome of any project is an uncertain factor, and in spite of this uncertainty, the actions that are taken in businesses are termed as risk. It is the consequence of actions that are taken in businesses even after knowing that the outcome of the consequence can be either positive or negative, i.e., either gain or loss.

Risk assessment is the process of calculating the potential risks that are involved in business projects. Risk assessment is done at the beginning of the projects and measures are taken to overcome the issues that increase the risks.

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Different types of risks in business

Every business has to face various types of risks, some of which are mentioned below:

  • Operational Risk
  • Financial Risk
  • Compliance Risk
  • Strategic Risk
  • Reputational Risk

Other than these main risks, there are any other risks that are associated with business.

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