Running a business is inherently risky. Many factors outside the control of the business owner can influence the success or failure of the enterprise and a high percentage of new businesses fail within a few months of inception. Even large and successful businesses can succumb to changing conditions. Consider what has happened to some of the largest companies in industries such as automobiles, telecommunications, computers, and railroads. To improve the probability of success, the management of a business should think about potential risks and how to offset them.
The losses to a business caused by increased expenses or decreased revenues could threaten the livelihood of the owner or owners. A realistic analysis of the risks inherent in the business and a plan for dealing with them will protect the business from unanticipated losses and disruptions to its flow of income.