Katherine wants to start a retail business of fashionable items. Change in taste and preferences of customers may result in loss in such type of business. She is hesitating as she is aware of risks which are inherent in every business. She approaches her friends Kristina who is the
owner of a retail shop. Krishtina advises her to go ahead with her idea as she will get profit as
return for undertaking risk. She also told her that some risks in business can be insured by taking
insurance policy. On the basis of the given information about Katherine answer the following questions: a) What is Business Risk?
b) Identify the main features of business risk discussed in the above case. Also quote the lines for the identified features.
c)Is change in taste and preferences of customers, pure risk or speculative, why?

Business risk refers to the possibility of experiencing lower profits or losses due to uncertainties or unexpected events that affect the business environment. These risks can stem from a variety of sources, such as changes in market conditions, fluctuations in consumer preferences, competitive pressures, and operational issues. Business risks are inherent in all business activities and must be managed to ensure the sustainability and profitability of the enterprise.

b) Identify the main features of business risk discussed in the above case. Also quote the lines for the identified features.

Uncertainty: Business risk involves dealing with uncertainties that can affect the outcome of business activities. This is evident in Katherine's concern about the potential changes in customer tastes and preferences.

Quoted Line: "Change in taste and preferences of customers may result in loss in such type of business."

Profit as a Return for Risk: Engaging in business entails taking risks, and the reward for taking these risks is the potential for profit. This concept is highlighted by Kristina's advice to Katherine.

Quoted Line: "Kristina advises her to go ahead with her idea as she will get profit as return for undertaking risk."

Insurable Risks: Some business risks can be mitigated through insurance, which can provide a safety net against specific uncertainties.

Quoted Line: "She also told her that some risks in business can be insured by taking an insurance policy."

c) Is change in taste and preferences of customers, pure risk or speculative, why?

The change in taste and preferences of customers is considered a speculative risk.

Reasoning:

Speculative Risk: This type of risk involves the possibility of both loss and gain. In the context of Katherine's business, changes in customer preferences could lead to either a positive or negative impact on sales. If customer preferences shift towards the fashionable items she offers, she could see increased profits. Conversely, if preferences shift away, she could experience losses. Thus, the outcome of speculative risk is uncertain and can result in either profit or loss.

Pure Risk: In contrast, pure risks involve situations where the only possible outcomes are loss or no change. These risks typically involve scenarios like natural disasters, theft, or accidents, where there is no potential for gain, only the possibility of loss or no loss.

Since the change in customer preferences can lead to both positive and negative outcomes for Katherine's business, it fits the definition of speculative risk.

MARK ME BRAINLIEST