RISKS IN BUSINESS--Contributed by @simplicitytech
Risk is like the yellow traffic light that indicates the imminent danger that comes with a red light. It is the moment to be more careful.
Risk taking is an essential aspect of an entrepreneurship, an entrepreneur is one who takes calculated risks. Some people have this common belief that risk is only in economic activities, making it light and negligible in other aspects of their life, whereas in business its a sign of imminent danger.
This untrue belief scares them away from activities that would have possibly turned their lives around for the better. The necessity of risk-taking isn't just tied to business, but to our lives in general.
It is important to note that decisions made in business fall under two possible conditions:
Certainty-- This occurs when full information about the alternatives are known. The risk level here is tending to zero, but it is never zero since there are always factors that cannot control
Uncertainty-- Here there is little or no information about the alternatives
. The risk level here is tending to 100. In business, these situations are usually signs of imminent doom.
Note that every other condition falls in between these two, depending on the risk level and the amount of information available.
Just as soldiers train and use the right equipment and tactics to avoid getting killed on the battlefield. Entrepreneurs too should try to reduce this risk they face to the barest minimum, by continually learning better ways to practice their craft.
There is never a zero risk situation, both in life and in business.
Therefore an entrepreneur should always be conscious of the risk element in his dealings since they are many to consider. While going about with transactions, he should take steps to reduce the amount of risk he's exposed to, till he is left with those he cant work around. This can be done through proper strategy layouts, planning, adjustments, good timing, patience and perseverance.
If the business is experiencing hard times, understanding this occurrence is essential. Losses should be accommodated and accepted as part of the business. It should be perceived as lessons to learn or a tactical move. Don't lose hope.
Many businesses have turned around even when the situation seemed hopeless.
As an entrepreneur, knowing the types of risk you face helps you make better decisions as to how to deal with them. I'll list out the common types, but be aware that there are others which are subjective to your situation.
- Insurable risks-- Risk that can be insured which may occur from theft, fire etc
- Uninsurable risks-- Risks that occurs as a result of natural occurrence(earthquake, war, landslide etc) that can not be insured
- Pure risk--These are risks that result from liability loss, losses due to death etc.
- Speculative risk-- It results in price fluctuation in product etc.
- Operational risk-- This results in financial mismanagement, fraud and embezzlement
Do not run away from economic activity just because of the risk involved. Control your fear and have self-control. Take the risk as the stepping stone for you, not as a stumbling block. Evaluate the risk, use common sense to walk through. Do not be ruthless in taking risks. All ventures are risky but some are riskier than others.
Apply wisdom in your dealings.
Editor: @winarobert, for the community!