What type of risk would be relevant to a business facing bankruptcy?

The situation of a business facing bankruptcy is best characterized by speculative risk. Speculative risk involves the possibility of loss or gain—it is uncertain and typically associated with business ventures, investments, or situations where outcomes can vary significantly. When a business is at risk of bankruptcy, it is dealing with the uncertainties involving its financial performance, market conditions, and operational effectiveness. It embodies the potential financial loss but also the possibility of making strategic moves that could enhance its situation.

On the other hand, while investment risk might seem related, it is more specifically concerned with the chance of losing money on investments, which is a narrower focus than the broader implications that speculative risk encompasses for a business facing bankruptcy. Operational risk relates to the internal processes, systems, or people that might lead to a failure in achieving business objectives, while pure risk involves scenarios where there is only a chance of loss, such as theft or natural disasters, without the potential for gain. Thus, speculative risk is the most fitting choice as it encompasses the uncertainties that a business grapples with during financial distress.