BUSINESS RISK: CONTROLLABLE AND NON- CONTROLLABLE

Business Risks: Controllable and Non-controllable
Controllable risks arise from the events taking place within the business enterprise. Such risks arise during the ordinary course of business. These risks can be forecasted and the probability of their occurrence can be determined. Hence, they can be controlled by management to an appreciable extent (e.g., risks of fire, storms, etc.). Controllable risks need not necessarily be prevented, but the financial loss can be minimised (e.g., insurance cover can be purchased to recover the financial loss due to fire).

Uncontrollable risks however, are those that would have a detrimental financial impact but cannot be controlled. Some uncontrollable risks that are common to many businesses include:

•  Recessionary economy. 
•  New competitor locating nearby. 
•  New technology. 

Each business faces risks that are unique to that business. Businesses should consider these carefully and briefly describe what steps would be taken if an uncontrollable risk actually happens to the business (contingency plan).

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