Question

Which of the following is an example of speculative business risk?

• A. A customer is injured while using the product and sues the company
• B. A supplier's shipment is lost in transit
• C. A special promotion fails to increase the sales
• D. A cashier gives unauthorized discounts to friends

Answer 1

The Correct Option is C

To solve the question, we must understand what speculative business risk means. Speculative business risk involves situations where there is a chance of either gaining or losing. It is not all negative, unlike pure risk, which only involves the chance of a loss.

Let's analyze each option to identify which one fits the definition of speculative business risk:

• A customer is injured while using the product and sues the company: This scenario is more about operational or liability risk, where the company faces potential legal or compensation costs. It doesn’t offer a chance of gain, only a loss.
• A supplier's shipment is lost in transit: This represents operational or logistical risk. It implies a potential loss in goods but doesn't present an opportunity for gain.
• A special promotion fails to increase the sales: This is a classic example of speculative business risk. While the promotion could potentially have increased sales (leading to a gain), the failure to do so results in a loss. Here, there was a possibility for both outcomes – profit or loss.
• A cashier gives unauthorized discounts to friends: This is an example of a compliance or internal control risk. There’s typically no gain from dishonest practices internally, just a potential for financial loss.

Hence, the correct answer is A special promotion fails to increase the sales, as it is the only option involving a scenario where there could be a gain or a loss, fitting the definition of speculative risk.