1) Internal Risks are those risks which arise from the events taking place within the business enterprise.
The various internal factors giving rise to such risks are:-
o Human factors:- They may result from strikes and lock-outs by trade unions; negligence and dishonesty of an employee; accidents or deaths in the industry;incompetence of the manager or other important people in the organisation,etc.
o Technological factors:- They may result in technological obsolescence and other business risks.
o Physical factors:- They include the failure of machinery and equipment used in business;fire or theft in the industry; damages in transit of goods, etc.
2) External risks are those risks which arise due to the events occurring outside the business organisation. Such events are generally beyond the control of an entrepreneur.
The various external factors which may give rise to such risks are :-
o Economic factors:- They result from the changes in the prevailing market conditions.They may be in the form of changes in demand for the product, price fluctuations, changes in tastes and preferences of the consumers and changes in income, output or trade cycles.
o Natural factors:- are the unforeseen natural calamities over which an entrepreneur has very little or no control.They result from events like earthquake, flood, famine, cyclone, lightening, tornado,etc.
o Political factors:- have an important influence on the functioning of a business, both in the long and short term.
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