[tolbiny]

There are many factors working in opposite directions, and while common sense may point to this possibility there are many reasons why it doesn't happen in actuality. Take inflation for example- inflation means that money must be either invested or spent or lose its value, there is risk
in simply holding money (ie capital) which in turn makes risky investments appear relatively less risky (when compared to holding dollars),

I disagree with this characterization. There is no "appearance of an investment becoming less risky". You are compensated for risk by a greater return on your investment then you can get from risk free investments. You are also compensated in the risk free rate of return for inflation.
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Risk reward calculations are made to weigh options against each other, they have no value in absolute terms, only in relative terms. Under inflationary pressures your options are (highly simplified) invest with risk reward X or hold with the expectation of depreciation. Under deflationary its invest with risk reward of Y or hold with the expectation of appreciation. Because the relative option under deflation is far superior investments must have a better risk reward ratio to be considered.

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Anecdotal evidence in the US? generally accepted numbers for small businesses are that 70-90% of them close within 5-10 years, with the majority closing because they are unprofitable (2/3rds is often quoted, no data or links to back that up right now).

It is my understanding that under-capitilzation, not long term prospects for profitability, is the primary reason for business failure. Even if it is profitability, that is an error in business judgement that is minimally impacted by inflation as shown above.
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It hardly matters the reason for failure since all reasons for failure are figured into risk reward scenarios.