Financial Risk

Direct financial risks have to do with how your business handles money. That is, which customers do you extend credit to and for how long? What is your debt load? Does most of your income come from one or two clients who might not be able to pay? Financial risks also take into account interest rates and if you do international business, foreign exchange rates.

Operational Risks

Operational risks result from internal failures. That is, your business’s internal processes, people or systems fail unexpectedly. Therefore, unlike a strategic risk or a financial risk, there is no return on operational risks. Operational risks can also result from unforeseen external events such as transportation systems breaking down, or a supplier failing to deliver goods.

Reputational Risk

Loss of a company’s reputation or community standing might result from product failures, lawsuits or negative publicity. Reputations take time to build but can be lost in a day. In this era of social networking, a negative Twitter posting by a customer can reduce earnings overnight. A negative blog post or a bad product review can occasionally spread like wildfire online, quickly thrusting a company into damage-control mode.

Other Risks

Other risks are more difficult to categorize. They include risks from the environment, such as natural disasters. Difficulties in maintaining a trained staff that has up-to-date skills to operate your business is sometimes called employee risk management. Health and safety risks not covered by OSHA or state agencies fall into this category as do political and economic instability in countries you import from or export to.