Worksheet
Topic B3: Business Risks
Part A – Key Term Definitions
Complete the table below using your own words.
Key Term Your Definition Example
Costs that stay the same regardless of how much a
Fixed Cost Rent, insurance, and salaries.
business produces or sells.
Variable Costs that change depending on how much a Raw materials, electricity, or
Cost business produces or sells. packaging.
Revenue A café selling drinks, snacks,
The different ways a business earns money.
Stream and merchandise.
Paying suppliers while
The movement of money in and out of a business
Cash Flow receiving payments from
over time.
customers.
The chance that a business might lose money or
Financial Losing a big client or
fail to meet financial goals due to internal or
Risk unexpected repair costs.
external problems.
Part B – Identifying Risks
Match the risk to the correct category.
Risk Cost Risk or Revenue Risk?
1. Rent increases by 10% Cost Risk
2. Customer pays one month late Revenue Risk
3. Electricity prices rise sharply Cost Risk
4. Competitor launches cheaper product Revenue Risk
5. Staff wages increase Cost Risk
Part C – Short Answer Questions
1. Explain how an increase in variable costs can affect a business’s break-even point.
When variable costs rise, each unit costs more to produce. This means the business must sell
more products to cover its total costs, increasing the break-even point.
2. Give two examples of revenue risks that a restaurant might face.
Customers dine out less during slow seasons (falling sales volume).
Regular customers delay payments for event catering orders (delayed payments).
3. Why is delayed payment from customers a serious issue for cash flow?
Late payments reduce the amount of cash available to pay expenses like wages or suppliers,
which can cause financial stress or missed payments.
4. Describe one way a business can reduce cost-related risks.
A business can create a strict budget and monitor expenses regularly to avoid overspending and
keep costs under control.
5. Explain why having only one main product or client is risky for a business.
If that product stops selling or the client leaves, the business could lose most of its income,
leading to serious financial problems.
Part D – Case Study: Apply Your Knowledge
Case: Sunny Blooms Florist
Sunny Blooms is a small flower shop. Recently, the shop owner has noticed that:
The cost of imported flowers has risen by 25%.
Several wedding clients delayed payments for two months.
A new competitor opened nearby with lower prices.
Task:
Write a short paragraph (100–150 words) identifying:
One cost-related risk,
One revenue-related risk, and
Two practical recommendations for the owner to manage these risks.
A cost-related risk is the rising price of imported flowers, which increases overall expenses and
reduces profit.A revenue-related risk is the delayed payments from wedding clients, which can
cause cash [Link] manage these risks, the owner should look for local flower suppliers to
reduce import costs and set clear payment policies that include deposits or shorter payment
terms. Keeping a small cash reserve could also help cover expenses during payment delays.
Case Study 2: TechFix Mobile Repairs
TechFix is a local phone repair business that relies heavily on walk-in customers. However, a
large electronics store nearby has started offering phone repair services at discounted rates. At
the same time, TechFix’s rent has just increased by 15%, and the owner is considering hiring
another technician.
Task:
1. Identify one cost-related risk and one revenue-related risk for TechFix.
2. Explain how these risks could affect cash flow and profit.
3. Suggest two strategies TechFix could use to reduce the impact of these risks.
(Write 150 words.)
A cost-related risk for TechFix is the 15% rent increase, which raises fixed costs. A revenue-
related risk is losing customers to the new electronics store offering cheaper repairs. These risks
reduce profit and may cause cash flow problems if revenue drops. To reduce the impact, TechFix
could introduce loyalty discounts or specialized repair services to stand out from competitors. It
could also control costs by delaying the hiring of another technician until sales recover or by
renegotiating rent.
Case Study 3: GreenFuel Delivery Services
GreenFuel is a small eco-friendly fuel delivery business that supplies local companies with
biodiesel. It recently signed several new clients, but most are on credit terms of 60 days. Fuel
prices have also become unpredictable, and vehicle maintenance costs are rising due to frequent
deliveries.
Task:
1. Identify one cost-related and one revenue-related risk.
2. Discuss how late payments and rising costs might affect the business’s ability to meet
short-term expenses.
3. Recommend two realistic actions to help GreenFuel manage its risks.
(Write 150–200 words.)
A cost-related risk is rising fuel and maintenance costs, which increase operating expenses. A
revenue-related risk is that most clients pay 60 days after delivery, creating long delays in cash
inflow. Together, these issues make it difficult for GreenFuel to pay bills and employees on time.
To manage these risks, GreenFuel could require partial upfront payments or offer small discounts
for early payment to improve cash flow. Additionally, the company could maintain an
emergency cash reserve or negotiate fixed-price contracts with fuel suppliers to stabilize
expenses. These steps would help ensure the business remains financially stable despite cost and
payment uncertainties.