In today's challenging and competitive environment, the task of designing appropriate strategies for managing risks in accomplishing the wealth maximization objective of corporates is of utmost importance. The opening up of Indian economy in 1991 has injected tremendous competition among business firms. With the significant changes in the business environment, the earning trends and the financing policies in the Indian corporate sector have also changed remarkably. It leads to notable changes in the pattern of business as well as financial risks associated with the corporates. Although much attention has been paid to analyze the issue relating to business and financial risks during the last few decades, the same has not been addressed with due importance in the post-liberalization period, particularly in the Indian context. In this backdrop, the present study seeks to analyze the business and financial risks in the Indian corporate sector during the period 1995-96 to 2006-07 and also to examine whether its findings conform to the theoretical arguments. The sample size of the study consists of 50 companies which have been selected by taking the top five companies (based on net sales revenue) from each of the 10 selected industries.

Risk management is essential for a firm to stabilize its earnings and to add value to its owners' wealth. So, in today's challenging and competitive environment, the task of designing appropriate strategies for managing risks in accomplishing the wealth maximization objective of corporates is of utmost importance. All organizations have to face risk of some form or the other. Nothing wrong with that; for, risk-taking is intrinsic to growth (Vedpuriswar, 2005). Since risks and returns go hand in hand, corporates cannot avoid the associated risks completely. Taking no risk may mean forgoing rewards. Managing risk aims at ensuring that risk remains at an acceptable level or within an acceptable range. Therefore, for the achievement of entity objectives, corporates should manage risk to be within their risk appetites.

The total risk which a company is exposed to can be broadly divided into two componentsbusiness risk and financial risk. Business risk is inherent in the business operations of the company. It is reflected in the volatility of the expected operating profitability of the company. Business risk is caused by several factors which can be categorized into three groups: (i) economy-specific factors, (ii) industry-specific factors, and (iii) company-specific factors. Economy-specific factors are those which affect all the sectors of the economy, such as fluctuations in foreign exchanges, competition, concentration of revenues, inflation, imports, and restrictive regulations. Industry-specific factors relate to the industry to which the company belongs. Special status enjoyed by the industry, growth prospects in the market for the products of the industry and so on are included in this category. Company-specific factors are identified as human resource management, liquidity, quality and project management, intellectual property management, cost structure, culture, values and so on. Business risks arising out of economy-specific, industry-specific and company-specific factors are regarded as economy risk, industry risk and company risk respectively. The genesis of company risk, in fact, lies in the instability on the company's one or more fronts, important of which are instability in cost behavior pattern, instability in generating sales revenue using capital base, and instability in short-term debt paying capability (Ghosh, 1997). These inherent weaknesses lead to cost structure risk, capital productivity risk and liquidity risk. Financial risk emanates from the financing decisions of the company. It arises out of the possibility of failing to meet contractual obligations and the possibility of fluctuation in income available to owners' equity.

Applied Finance Journal, Financial Risks, Corporate Sectors, Business Risks, Risk Management, Project Management, Intellectual Property Management, Business Strategies, Post-liberalization Period, Multiple Regression Analysis, multiple Correlation Analysis, Capital Productivity Risk, Domestic Appliances, Liquidity Risks.