Question

In a free-market economy, firms face some degree of uncertainty, or risk. Some of this risk is controllable, and some is not. Identify the different types of risk that a business might encounter in the marketplace and identify whether they are controllable or uncontrollable. Justify your answer.

Answer 1

Explanation:

Controllable risks are those that the company can control more actively, they can be the risks of internationalization of the business, for example, risk of an investment in a country where there is not much certainty that the company will be successful or a country in economic crisis.

Non-controllable risks are those inherent to the market, that is, companies cannot control certain situations, such as an economic and political crisis that affects consumers' purchasing power and makes them consume less and thus directly affects business .

Therefore, it is necessary to have an effective risk management in any organization, in order to monitor market situations and identify possible risks and to anticipate solutions to enable the company to minimize losses arising from any negative risk that may arise.