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Apoorvi, from the young age had a deep connection with traditional Indian textiles and craftsmanship. Founder and designer Apoorvi kher who fulfilled her lifelong dream of making a career in fashion by leaving her professional life behind and pursued a design programme at the Los Angeles School of Design and Merchandising. Thus, Apoorvi got maximum real world fashion exposure. With her love from these Indian fabrics and her arsenal of fashion knowledge she now intends to glorify these national treasures with her readymade store ‘Armaniya’. ‘Armaniya’ is an initiative to incorporate a perfect mix of latest trends, luxury fabrics, Indian traditional weaves and culture all under one roof. She manages the business along with two employees i.e. salesman and cashier, She usually takes advice from her father in case of any managerial issue. Now a days, Apoorvi is facing a lot of problem as trends in the field are continually changing, meaning businesses must continually adapt of market demands, this ever changing market along with strong competition has added to the trouble of declining sales, Furthermore, one day Apoorvi found her cashier doing some embezzlement of cash. a)Identify the different causes of business risks discussed in the above case. Also quote the lines for the identified cause. b)Are the above identified risks pure risk or speculative risk? Give reason in support of your answer.

Sagot :

basantibhatt007

Explanation:

a) Causes of Business Risks and Corresponding Quotes

1. Changing Market Trends:

Quote: "Trends in the field are continually changing, meaning businesses must continually adapt to market demands."

Explanation: The fashion industry is known for its rapidly changing trends, which can be difficult to keep up with and can impact sales if the business does not adapt quickly enough.

2. Strong Competition:

Quote: "This ever-changing market along with strong competition has added to the trouble of declining sales."

Explanation: The presence of strong competition can make it harder for a business to maintain its market share and can lead to declining sales.

3. Internal Fraud/Embezzlement:

Quote: "Apoorvi found her cashier doing some embezzlement of cash."

Explanation: Internal fraud or embezzlement by employees poses a significant risk to the financial health and integrity of a business.

b) Type of Risks: Pure Risk or Speculative Risk

Changing Market Trends and Strong Competition:

Speculative Risk: These risks involve the potential for either a loss or a gain. The business must adapt to changing market demands and face competition, which can either result in increased sales (gain) if successful or further decline in sales (loss) if not. The speculative nature of these risks lies in the uncertainty and the possibility of both positive and negative outcomes.

Internal Fraud/Embezzlement:

Pure Risk: This risk involves only the potential for loss with no opportunity for gain. Embezzlement of cash by an employee is a scenario where the business can only experience a negative outcome (loss of funds) and there is no potential benefit from such an event. Pure risks are typically insurable because they are associated with only downside risk.

In summary, changing market trends and strong competition represent speculative risks because they can result in either gains or losses for the business. In contrast, internal fraud or embezzlement represents a pure risk because it can only result in a loss.

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