Question

1. What kind of business risk do businesses in the defense industries face?

2. How do they manage financial risk?

Answer 1

Answer:

Political risk- Defence industry faces the political risk. Defence is affected by the political arguments, some parties encourage the defence team of the country while some parties are not in favor of some decisions.

Social unrest- Terrorists are the biggest threat for defence industry, terrorists can attack any time.

Emerging technology- Defence industry also faces technology risk, there is use of robotics technology and artificial intelligence in the defence sector. Some people are not given proper training of these technologies, these technologies can be misused also.

They manager financial risk because they get subsidy from Government. They perform quality control test. They diversify the income into different asset class to mitigate financial risk. Defence companies also buy insurance to minimize financial risk.