Commercial risk
Commercial risk is defined as the risk a company takes by offering credit with no collateral. It is a common term in the business world. Any time a company offers credit, be it trade credit, credit terms like 2/10 net 30, or other, they essentially offer financing with no collateral. In this situation, the company is taking a commercial risk. You may need solutions.
Explained as the risk a company takes with its customers, it is a common risk of doing business. Most companies allow credit terms. So, almost every company must take on some form of commercial risk. Analysis of this is often professionally evaluated by companies, like insurance providers, who must make sense of the commercial risk of a company to do business. Management affects the company, insurance providers, investors, lenders, and more.
Likely, commercial risks cannot be eliminated. For this reason, one of the most widely accepted risk management models involves four approaches toward identified risks:
-Risk Acceptance - the risk is accepted, and no further action will be taken.
-Risk Transference - the risk is transferred to another entity. The most common way to do this is to get appropriate -commercial risk insurance.
-Risk Avoidance - the risk is avoided by also avoiding a step or action that brings the risk with it.
-Risk Reduction - The risk is significantly reduced through extra steps or actions.
Commercial Risk. Strategic CFO. Retrieved from: https://strategiccfo.com/articles/banking-financing/commercial-risk/
Examples of commercial risk. Kase. Retrieved from: https://kaseinsurance.com/examples-of-commercial-risk/