Market Demand (in risk context) is the possibility that client demand for the firm's products and services may decline, irrespectively of the firm's business ability or competitive pressures from other providers.
Nature of the risk
The risk of lower market demand is part of the business risk of the firm. Factors behind reduced demand in hierarchical order
- General economic factors
- Shifting client preferences versus financial / insurance services (sectoral demand factors)
- Shifting client preferences versus specific product / service types (product demand factors)
Reduced demand has impact on the firm's long term (franchise value). Demand shifts occuring lower in the economic hierarchy may be manageable via strategy shifts, subject to Strategic Risk