What is a major risk an entrepreneur may face by failing to follow legal rules?
Answer and explanation
Correct answer: Penalties, possible closure and loss of public trust
Legal rules protect customers, employees, the environment and fair business practices. If an entrepreneur violates them, the business may face fines, cancellation of licences, legal proceedings or even closure. Public trust can also decline, causing customers and business partners to leave. The other options describe automatic benefits that do not follow from non-compliance. Hence, legal non-compliance creates financial, operational and reputational risk.
Frequently asked questions
What is the correct answer to this question?
Penalties, possible closure and loss of public trust
Why is this the correct answer?
Legal rules protect customers, employees, the environment and fair business practices. If an entrepreneur violates them, the business may face fines, cancellation of licences, legal proceedings or even closure. Public trust can also decline, causing customers and business partners to leave. The other options describe automatic benefits that do not follow from non-compliance. Hence, legal non-compliance creates financial, operational and reputational risk.
Which subject and chapter does this question cover?
This is a Class 11 Business Studies question. Chapter: Business, Trade and Commerce. Topic: Business Risk.
