Which type of losses could jeopardize the very survival of a firm?

Critical risks are those that pose a significant threat to the survival of a firm. These risks can have a substantial impact on the organization's operations, financial stability, and reputation. When critical risks materialize, they often result in severe financial losses, operational disruptions, or long-term damage to a company's standing in the market.

Firms must be adept at identifying, assessing, and managing these critical risks to ensure sustainability and resilience. Unlike insignificant operational losses or minor financial impacts, which may be manageable and may not threaten a firm's existence, critical risks require proactive risk management strategies to mitigate their potential effects. Additionally, low probability risks, while they may be severe if they occur, are characterized by their low likelihood of happening, which differentiates them from the more imminent and actionable nature of critical risks. Thus, understanding and addressing critical risks is essential for maintaining a stable and secure business environment.