Legislation / political circumstances – all businesses will be subject to
risks created by legislation or political circumstances at some stage of
their life. Legislation that has the biggest impact on businesses would
generally be taxation, industrial relations, and recently measures to reduce
carbon emissions. Numerous other pieces of legislation will affect specific
industries. Political circumstances may be political instability in a country
where you have significant investments in.
f Management activities and controls – one of the biggest risks businesses
take is dictated by management decisions. It may be the decision to expand,
diversify the business or strategic investments. While the expectation would
be that management has taken the right decision, there is the risk that such
decisions may impact negatively on the business. Probably the most famous
(infamous?) management decision a company took was in 1985 when Coca
Cola changed the formula of its famous drink. It was a marketing failure,
with Coca Cola forced to go back to the old formula within 3 months of the
launch of “the new taste of coca cola