Essay on the relationship between business and financial risks

Risk management is fundamentally important to a business. It is widely acknowledged that the firm's performance and internal concerns are influenced by two types of risks: financial risk and business risk. To avoid the firm bearing excess risk, it has been suggested that financial risk should be considered alongside business risk to prevent any excess risk from being borne by the firm, who can implement acceptable and reasonable financial strategies. The corporate strategic model created by Ruth (2019) states that there exists a necessary inverse relationship between business and financial risk in the pursuit of optimal firm value and to prevent default or bankruptcy. This includes risk portfolios of high business risk, low financial or low business risk, and high financial risk. [...]