Managing Risks in Entrepreneurship.
Kirjoittanut: Hassan Chakir - tiimistä SYNTRE.
Risk-taking is a part of everyday life, whether it’s driving a car, traveling overseas, or choosing the gas station sushi on that one road trip back in the day (no judgment, we’ve all done it). But being an entrepreneur is not for the weak of heart. Starting a company from scratch requires courage.
Risk-taking is a studied and measured outcome of launching a business, despite the fact that the word “risk” could conjure up images of chaos and unpredictability. Entrepreneurial risk-taking is the process of recognizing, analysing, minimizing, and testing out prospective possibilities and tactics that may aid in the development or expansion of your organization but also pose a risk of financial or professional loss.
Business risks are divided into three groups by the Harvard Business Review: avoidable risks, strategic risks, and external risks. Whether a team of one or a thousand, preventable threats originate within a company and should always be avoided. Risks that may be avoided include deceiving potential investors, disregarding environmental laws, and participating in unlawful business practices.
Entrepreneurship requires and benefits from taking strategy risks. Strategic possibilities that have the potential to provide a return on investment give rise to these risks. Examples include introducing a new product line, growing internationally, or enlisting new investors.
External dangers make up the last group. These hazards, as their name implies, are independent of your company’s activities and are beyond your control. For instance, you’ll probably have little to no control on the present economic climate or emergency situations, but they may have an impact on the success of your business efforts.
For instance, acquiring finance is one item that will make things more challenging for business owners. The stakes to success rise as you take on additional money, whether you take out a line of credit, raise money through a business accelerator, or borrow some cash from Uncle Bob’s funds. When raising money, there are several hazards to consider. For instance, if your firm fails, your investors can also suffer significant losses. On the other side, you risk losing majority ownership and control of your company if you sell up too much equity in order to raise capital.
At this point, a vital question occurs which is “How to manage risk-taking?”. Well, the common way to approach business risk management is to have a clear process or guideline that can be followed in any situation.
First, is to start defining the areas of business risk. However, there are some classifications to use as basis. For example, the risk to the business’s value-added offerings (products/ services), the possibility of a negative customer relationship, risks associated with some of the company’s major resources and important partners. Additionally, it is not required that a business risk will exist in any of the defined categories. Not all risk regions may experience the same level of business risk.
Second, business risk signs to look at. The risk indicator is a type of measurement that should let you know if the risk is there in the particular risk area or not. Delivery delays of at least three days can be used as a risk indicator for the business risk associated with distribution channels to show that something is wrong.
Third, tracking of identified danger areas. This stage’s objective is to keep an eye on specified risk areas using risk indicators to make sure nothing is going wrong. For example, you must proceed to the following step if the delivery is more than three days late.
Next step is to implementing specific actions to address the business risk. You should aim to standardize all actions at this point for each risk area and risk indicator. You cannot assume that these will be the last word. It suffices to have some framework for potential actions and responsibilities since an immediate and effective response is required when the risk materializes. However, no one wants to get to the point where no one in the organization knows what to do or who should act when the risk materializes.
Lastly, Auditing. Always have that there must be a better way. Do we require new indicators? The next phase, which requires advance planning, is who, how, and when to audit the risk areas and risk indicators.
In conclusion, a crucial aspect of our entrepreneurial path is risk management. We will be on the proper path to entrepreneurial success when we grasp this concept as soon as feasible. No matter what market or sector the company works in, it is well understood that there will always be a significant degree of unpredictability. Due to the high degree of uncertainty, danger of any kind is quite likely. Due to this, it is crucial for business owners to use this risk management guide to advance in achieving their goals by striving to eliminate or minimize potential business risk types.
Corey B. Hubspot. Link: https://blog.hubspot.com/the-hustle/risk-in-entrepreneurship. Published 02.09.2022. Read 03.10.2022.
Robert S. Harvard Business Review. Link: https://hbr.org/2012/06/managing-risks-a-new-framework. Pub 06.2012. read 03.10.2022.