Business risk refers to the possibility of inadequate profits or even losses due to uncertainties or unexpected events. For instance, demand for a product may decline due to changed consumer preferences, or a shortage of raw materials may increase production costs, thereby reducing profits.

Risk is an essential part of every business and arises due to uncertainties, which implies a lack of knowledge about future events. The degree of risk depends on the nature and size of business; for example, dealing in fashionable items involves higher risk. Furthermore, profit is the reward for risk taking, following the principle of 'No risk, no gain'.

Business risks arise due to a variety of causes. Natural causes include events beyond human control, such as floods, earthquakes, lightning, heavy rains, and famines. Human causes arise from unexpected events like dishonesty, carelessness, or negligence of employees, as well as strikes, riots, and management inefficiency.

Economic causes include uncertainties relating to demand for goods, competition, price, and collection of dues. Changes in technology or method of production and financial problems like a rise in interest rates also fall under this category. Lastly, other causes include unforeseen events like political disturbances, mechanical failures, and fluctuations in exchange rates.