Which of the following factors can contribute to business risk?

Business risk encompasses a wide range of potential challenges that can affect an organization’s profitability and operational success. The correct answer highlights that both internal and external factors contribute to business risk.

Internal factors include aspects such as management decisions, internal processes, financial stability, and workforce capabilities. These elements significantly impact an organization’s ability to operate efficiently and respond to challenges. For instance, poor internal communication might lead to misunderstandings, which can hamper productivity and result in financial losses.

External factors, on the other hand, involve outside influences that can affect a business, such as market competition, economic conditions, regulatory changes, and technological advancements. These factors can create opportunities or pose threats that the business must navigate to sustain its operations and growth. For example, a sudden economic downturn can lead to decreased consumer spending, thus impacting sales.

Evaluating customer feedback and effective internal communication are essential for managing and reducing risks, but they do not cover the full spectrum of factors that contribute to business risk. They are more tools for risk management rather than sources of risk themselves. Therefore, recognizing the broader context of both internal and external influences is crucial for understanding the complexity of business risk.