The basics Risk is the uncertainty associated with future possible outcomes. There are different types of risk.
Business risk is the uncertainty associated with operating cash flows of a business.
There are different dimensions of business risk, namely sales risk and operating risk. Sales risk is the uncertainty associated with the price of the goods and the number of units sold. This risk is affected by the demand elasticity of the goods, as well as market and economic factors. Operating risk is the risk associated with the mix of fixed vs. variable operating costs. The DOL is determined largely by the line of business.