Final answer:
Internal risks are issues from within an organization, such as incompetent staff or strikes, that can harm operations or financial performance. Managing these risks involves good training, clear policies, and strong communication.
Step-by-step explanation:
Internal risks refer to potential issues within an organization that can negatively impact its operations or financial performance. Examples of internal risks include incompetent staff, negligent employees, or situations where employees go on strikes. These scenarios can lead to reduced productivity, lowered morale, and financial losses.
For instance, the insider-outsider model of the labor force highlights the importance of 'insiders,' or existing employees, in maintaining a smoothly running organization. If these insiders become alienated, perhaps due to cutting wages or poor management, their dissatisfaction can lead to internal risks such as a withdrawal of cooperation or a desire to leave the company, which in turn affects the firm's productivity and prospects.
These types of risks stand in contrast to economic risks which are often outside an individual or an organization’s control, such as natural disasters or war. To manage internal risks, companies may engage in thorough training, establish clear policies, and encourage good communication to ensure employees are competent and satisfied with their workplace conditions.