Business risk

Short answer – yes – here are a couple of examples you might see in model answers/examiner’s reports.

Family-run businesses often lack formal governance structures like a board of directors or a robust internal audit function. This can lead to a concentration of power within the family, potentially increasing the risk of conflicts of interest or poor decision-making – this is business risk.

Family-run businesses are more likely to engage in related party transactions, such as loans to family members or sales to family-owned entities. Not conducting such transactions at fair value is a source of business risk – the RoMM is that such transactions are not adequately disclosed (IAS 24).