Events like these threaten the security of a business. They cost money, and they may cause a business to fail. First, entrepreneurs must be able to identify all the possible risks they face, then decide upon preventive measures to eliminate or reduce the impact of the risks. Risks, such as building a plant that turns out to have the wrong capacity or keeping an inventory level that turns out to be too high or too low, are speculative risks. PURE RISK is uncertainty as to whether some unpredictable event that can result in loss will occur.
Pure risk can result only in loss, never in gain.
This kind of risk consists of hazards such as a fire or a hurricane, death of key employees, or customer injuries on the premises of the business. Pure risk exists when the possibility of loss is present, but the extent of the possible loss is unknown. Pure risk is different from speculative risk because speculative risk carries the possibility of gain as well as loss. Not starting a business at all is the only sure way to avoid the risk. Successful entrepreneurs, however, take control over how much risk they are willing to accept and then develop plans to control the remaining risks.