There's a business owner who has kept a company running for several years even though a single client accounts for half of all revenue. During a bank loan consultation, they were asked to explain why that client was a risk — and they froze. All that came out was "it just makes me uneasy." Moments like this are exactly when you need a method for defining business risk. Today we'll use the risk disclosures in the recent 10-K filed by Nvidia, the world's largest semiconductor company, as a teaching text for this skill. We won't be discussing whether to buy or sell Nvidia stock. Instead, we'll practice borrowing the way a large corporation puts risk into words and applying it to your own business.
Three Questions That Turn Risk Into Numbers
Even a risk that feels vague turns into something manageable once you answer three questions with numbers. First: if this variable shifts, how much does revenue or cost move? Second: can you predict when that effect will show up, or is even the timing unknown? Third: why is this variable connected to your business structure in the first place? Building the habit of answering all three with numbers is the core of defining business risk.
How Nvidia Puts Its Risks Into Words
Nvidia's capital expenditures (CapEx) rose 79%, from $3.4 billion in fiscal 2025 to $6.1 billion in fiscal 2026. That number by itself isn't the risk. The risk begins with how much this spending squeezes free cash flow — net income plus depreciation, minus CapEx — and in turn shrinks the room left for dividends and share buybacks. Here's that chain laid out as a diagram.
In short, the real risk isn't the size of the investment — it's the path connecting that investment to cash and dividend capacity.
Timing risk shows up clearly in the tax section. The company carries $4.0 billion in unrecognized tax benefits as a liability, of which $370 million is interest and penalties alone. The IRS is currently examining fiscal years 2023 and 2024, and the company states it cannot predict when a resolution will come. When you know the size of a risk but not its timing, that's worth flagging separately.
Currency risk needs to be split precisely into its component parts. A 10% strengthening of the dollar would swing the mark-to-market value of the company's forward contracts alone by $180 million (versus $136 million a year earlier). The impact on actual sales is a separate matter, showing up through the channel of overseas customers delaying purchases because their own currencies have weakened. Keeping hedging gains and losses separate from operating gains and losses is also part of putting risk into precise words.
Translating the Framework Into Your Own Numbers
You can apply this framework directly to your own business. If one client accounts for half your revenue, calculate what percentage of revenue would disappear if that client left, and how much fixed cost would remain. If you're exposed to external variables like raw materials or rent, calculate exactly how much your costs would change if that variable moved 10%, and write the number down next to your contract or business plan. For risks with an unknown timeline — taxes, licensing, permits — simply noting "timing unknown" alongside the size of the exposure changes how persuasive your explanation is.
One Thing to Try Today
Write down, as a percentage, how much of your revenue comes from your single largest client. Then write down, as actual numbers, how much revenue and how much fixed cost would remain if that client disappeared. With just those two lines, the next time a bank or an investor asks, you'll be able to answer with concrete numbers instead of saying you're just uneasy.
