Depending on the source of occurrence, business risk can be classified as follows:
– strategic risks – the risks that company’s strategy will become less effective due to technology changes. For instance, constant technology advancement can make company’s methods and products irrelevant and this, in turn, will lead to a decline in sales or inefficient production. The effectiveness of the strategy may be affected by emergence of a new strong competitor, changes in consumer demand, rising commodity prices, etc.;
– compliance risks – the risks of non-compliance with all necessary laws and rules applied to business. Due to changes in legislation the companies always risk to unintentionally violate the law. For instance, as a result of expansion of the geographic market, the company must comply with new rules which were not previously applied to it. Compliance risks can also be faced when the company just expands its product line, so that it must adhere to new rules of accounting;
– operational risks – the risks that interrupt the main operations conducted by the company resulting form the events caused by people or processes. In particular, it can be caused by malfunction, for example, server failure, or the responsible person can make an error in a number of goods shipped or there may be a failure of utilities operation (electricity, gas, water supply);
– financial risks – the risks that have financial influence in a form of additional costs or loss profits. For instance, inflation risk, interest rate risks, currency risk, tax risks, insolvency or non-payment, budget cut or loss of grants or funding;
– reputational risks – the risks that lead to loss of income and clients. For instance, the level of service is lower than expected, serious lawsuit, unsatisfactory feedback on product, negative publicity about the company and its employees, criticism of company’s products or services, loss of stakeholders’ trust due to operational deficiencies.