The operating, or “fundamental,” risk of a company is the
risk a company faces because of the business it is in. For example, the profits a firm makes depend
on the demand for its goods and the costs of producing the goods, so it
inherently faces the risk that costs could increase and/or demand could fall,
which would affect the profits of the firm.
Operating risks result from the investment decision of the firm, and are separate from financial
risk,...
