What is a business risk?

Business risk refers to a threat to the company’s ability to achieve its financial goals.
In business, risk means that a company’s or an organization’s plans may not turn out
as originally planned or that it may not meet its target or achieve its goals.

Types of business risks?

Financial
Financial risk is the possibility of losing money on an investment or business venture.

Operational
Operational risk is the risk of losses caused by flawed or failed processes, policies,
systems or events that disrupt business operations.

Reputational
A reputational risk is a threat to the positive perception others have or should have
about our company, our products or services, or about us. It can lead to a number of
negative consequences including: Loss of current and potential clients.

Government and compliance

Compliance risk is an organization's potential exposure to legal penalties, financial
forfeiture and material loss, resulting from its failure to act in accordance with
industry laws and regulations, internal policies or prescribed best practices.

Strategic
Strategic risks are those that arise from the fundamental decisions that directors take
concerning an organisation’s objectives. Essentially, strategic risks are the risks of
failing to achieve these business objectives.
NIKE.inc

Founded in 1964 as Blue-Ribbon Sports, Phil Knight started a small, Oregon-based

company that turned into a global juggernaut. Today, Nike is the world’s largest
supplier of sports apparel. In 2017, Forbes recognized it as the world’s most valuable
sports brand. Revenues in 2017 reached a whopping $36.4 billion. Headquarters are
located in Oregon,USA.
With all of that said, Nike is not resting on its laurels. Its corporate mission is “to
remain the most authentic, connected and distinctive brand.” As part of this vision,
Nike has pledged to deliver high-performance products to consumers, further
connect consumers with Nike’s already strong brand, and further distinguish itself
from competitors in the marketplace by delivering the best products possible.
Even though Nike has a vast number of resources to carry out this vision, the road
ahead is uncertain. Like other successful companies, Nike must take certain risks in
order to reap certain rewards. That said, Nike does not attempt to minimize risk as a
whole; rather, the company is more strategic. Nike positions itself to be exposed only
to the right kind of risk in order to accomplish its strategic objectives.

The most pressing risk for Nike involves changes in consumer preferences and
demands. As with any consumer business, Nike rests on fragile ground, as
consumer preferences and demands can quickly change. This is especially true in
the footwear industry (which represented 65 percent of Nike’s revenues in 2018).
While Nike is the leader in the world sportswear market, companies like Adidas are
showing off stronger sales growth and increasing competition in China, the second
largest market.
Nike has worked to mitigate these risks in a number of ways. It has purchased
several start-ups that specialize in 3D printing technology and artificial intelligence
and has embraced automation in its operations. It has divested from some of its
controversial manufacturing arrangements and has relied more on contract
manufacturing. The company has even shifted its marketing strategy, embracing
influencer marketing to separate itself from the competition.

In addition to changing consumer preferences, Nike must attempt to mitigate losses

due to taxes, tariffs, interest rates, and exchange rates. Nike, quite obviously, is a
global company and is affected by floating currencies, various tax legislation, and
interest rates. As just one example, the Trump Administration’s Tax Cuts and Jobs
Act created a one-time tax on foreign earnings of around $2 billion, significantly
affecting Nike’s net income in FY 2018.
Nike has worked to mitigate these risks. Besides the $2 billion one-time tax charge,
Nike has paid an effective tax rate of 6.4 percent in Q4 2018 compared to 13.7
percent in FY 2017. Nike also leverages legal tax reduction methods to reduce its
exposure to further tax legislation.

Finally, Nike must mitigate its risk in terms of counterfeited goods. Nike faces some
headwinds due to the fact that footwear is the most counterfeited category in the
world and that Nike is the most counterfeited brand in the world. In fact, according to
Business Insider, brands like Nike lose up to 10 percent of revenue due to
counterfeits. The biggest counterfeiting culprit is China, a key market for Nike.
The company recognizes that this is a problem and has taken steps to combat it. For
instance, it has created a forum for consumers to report instances of counterfeiting,
has partnered with Amazon’s Brand Registry program to stop counterfeits being sold
on Amazon, has lodged complaints with the International Trade Commission, and
has cooperated with worldwide law enforcement to support anti-counterfeiting
measures.

it has yet to find a coherent way to talk about the climate crisis it purports to be
responding to. Last fall, Nike announced its “Move to Zero” Scheme, pledging to
power all facilities with 100% renewable energy and operate with net-zero carbon
emissions. The term “zero waste” featured heavily in the literature and conversations
surrounding last week’s events, too, although unfortunately, this choice of words is at
odds with Nike’s celebration of technological innovation through research – of which
trial and error, and thus at least some degree of waste, is a natural part. Putting
“zero waste” in the mouths of company ambassadors undermines their message of
deep, integrated environmental awareness in favor of a trendy formulation, which
could make Nike’s commitment to climate response seem more superficial than it is.
Nike is yet to fully solve its waste problems.