Understanding Different Types of Risk

What is the main purpose of risk management in business?

• To increase the number of risks

• To identify and reduce potential problems

• To ignore possible dangers

• To spend more money

Which of the following is an example of economic risk?

• Changes in government laws

• Fluctuations in market prices

• Differences in language

• Pollution

What type of risk involves differences in beliefs, customs, and traditions?

• Economic risk

• Cultural risk

• Political risk

• Environmental risk

Which risk is related to changes in government policies or instability?

• Currency risk

• Political risk

• Environmental risk

• Economic risk

What is environmental risk?

• Risk from changes in exchange rates

• Risk from natural disasters or pollution

• Risk from new competitors

• Risk from cultural misunderstandings

Currency risk is best described as:

• The risk of losing money due to theft

• The risk of changes in exchange rates affecting profits

• The risk of new laws being introduced

• The risk of product failure

Which of the following is a strategy to manage risk?

• Ignoring the risk

• Hedging

• Increasing prices only

• Reducing staff

What does diversifying products mean?

• Selling only one product

• Offering a variety of products

• Reducing the number of products

• Copying competitors’ products

Why might a company diversify its markets?

• To increase risk

• To depend on one country

• To reduce the impact of problems in one market

• To make products more expensive

Invoicing in stable currencies helps to:

• Increase currency risk

• Reduce currency risk

• Make products cheaper

• Confuse customers