What is an example of economic risk?

Economic risk refers to the potential for financial loss due to economic factors that can negatively impact a business's operations or financial performance. Unemployment is a prime example of economic risk because it directly affects consumer spending and overall economic stability. When unemployment rises, there are fewer people with disposable income, leading to decreased demand for goods and services. This can result in lower revenues for businesses, potential layoffs, and even company closures.

In contrast, vandalism, robbery, and negligence are categorized more as operational risks or security risks, where the focus is on direct harm to assets or liabilities rather than broader economic conditions. While they can lead to financial losses, they do not embody the overarching economic factors that influence the conditions of the market and economic environment in which a business operates. Thus, unemployment is the clearest representation of economic risk in this context.