Page 244 - RISK Management IC 86

Risk Management

competitors' undercut of the prices or introduction
of better products. Fashion, tastes and trends of
consumers might change.

General economic conditions at home or abroad may
react adversely on the sales. An export deal may be
lost due to some political moves, such as changes in
exchange controls, tariffs, or import quotes. Although
firms may seek to minimize such risks by extensive
market research before launch, many products,
especially the new ones tend to fail.

(iii) Financial Risks - Credit plays an important role in
the financing of most businesses, and a firm may
find itself in difficulties owing to factors affecting
either the credit received or credit extended.

An increase in the cost of borrowing caused by a
rise in market interest rates cut profit but more
important is the availability of credit, bank finance or
even overdraft facility.

A heavy dependency upon the loan capital relative to
equity capital increases the risks for creditors and

Sashi Publications - www.sashipublications.com 245

Copyright@ The Insurance Times. 09883398055 / 09883380339