The Forms of Business Risks and Practical Ways of Managing Them

Business risks are the likely dangers that a business enterprise may encounter if preventive measures or safety precautions are not put in place to avoid them. When an enterprise experiences a particular business risk, the entrepreneur should not point finger at witches, ghosts or enemies. They happen as a result of poor planning and failure to set out measures in managing these risks. There are two main types of risks that a business enterprise is likely to face.

These are Direct risks and Indirect Risks.

1. Direct risks- This is a type of business risk that could entirely collapse a business enterprise. They directly affect the enterprise and halts down all of its business activities. Due to the severity of direct risks, entrepreneurs should set out preventive measures of curtailing them. Examples of direct risks include theft, fire, bankruptcy, misuse of capital through irresponsible expenses etc.

2. Indirect risks- This type of business risk slowly causes the collapse of the enterprise. If extreme care is not taken, it can be hidden from entrepreneurs. Like a slow poison, indirect risks if left unchecked can ruin a business enterprise. They are quite difficult to control and account for greater portion of business losses. Examples of indirect risks are lack of sales due to faulty or low quality products, wrong business locations, currency inflation, introduction of new taxes, changes in labour laws etc.

Business risks whether direct or indirect can be managed or controlled. The entrepreneur should be very vigilant and alert in his supervisory role. There should be regular or routine check of stocks and finished products. Only the entrepreneur cannot do this work. An accountant or book keeper should be employed and assigned to check the accounts of the business every month or even daily depending on the size of the enterprise or the rate of purchase of products.

Also, the entrepreneur has to increase vigilance and security by beaming up the security such as employing security personnel and installing security devices. These measures would help minimize or entirely stop the cases of theft.

Most of the fire outbreaks that occur in the enterprises are as a result of faulty electrical connections and appliances. The entrepreneur must employ a qualified electrician to do all the electrical connections or wiring in the enterprise. He has to replace all weak or faulty wires and other electrical appliances to avoid the likelihood of fire outbreak.

Low sales and patronage of the products of an enterprise can be as a result of several factors. Paramount among these is due to the low quality nature of the products and wrong business location. The entrepreneur must undertake training for his staff members while constantly checking for product quality. He has to use quality and durable materials for the manufacture of his products. Furthermore, if wrong business location is causing the drop in sales of products, the entrepreneur should relocate the business to a more promising area where there would be high patronage for his products.

Inflation and constant changes in labour laws can affect the success of a business enterprise. An entrepreneur should be always alert to these changes. He can do this by keeping in touch with the relevant ministries to know what new changes have been planned that may affect one’s business.

It takes a great deal of time and efforts for entrepreneurs to set up enterprises. Owing to this, they must vigilantly guard against any internal or external dangers that might result in their collapse. Identifying and controlling potential threats to businesses is the guaranteed way to succeed.

Risks and Rewards of Entrepreneurship

Entrepreneurship which is the practice of finding and starting a business opportunity, locating and consolidating the required money and materials and taking both the risks and rewards associated with the venture is where all who wish to make and enjoy great wealth should tune their mind and heart to.

Everything in life has two sides like the proverbial two sides of a coin. Entrepreneurship is fraught with dangers, perils, hazards and threats or risks just as it has booties, returns, compensations or incentives also known as rewards.

Here are risks and rewards of entrepreneurship which I would like discuss briefly in this article for the benefit and information of those wishing to embark on the great journey of entrepreneurship:

Risks of Entrepreneurship

Getting Paid – The income of the business enterprise would determine whether the entrepreneur gets paid or not. The entrepreneur does not have the luxury of an assured paycheck like his counterparts in paid employment. If the business does not make profit, there is nothing for the entrepreneur.

Sporadic Income – The start-up entrepreneur may not have enough business to provide him or her with steady income. His or her income may fluctuate from day to day or from month to month.

No Income – An entrepreneur may face a season in his or her business life when there would be no business at all or when customers have failed to meet their payment obligations and therefore no income. Start-up entrepreneurs are usually advised to save at least enough to cover six months expenses and income needs as part of their financial planning.

Having Security – Whatever an entrepreneur has comes from the business. Unlike people in paid employment who may have a compulsory retirement savings account backed by their employer, the entrepreneur has to provide his or her own insurance and retirement security. Before moving from paid employment to full time entrepreneurship, it is important that aspiring entrepreneurs add as part of their financial planning, some element of insurance and retirement security through savings.

Rewards of Entrepreneurship

Passion – Passion they say sells. One of the greatest joys of entrepreneurship is working daily on the passion of your life. When one’s work and daily pursuits are in the realm of his or her innate desires, one works with enthusiasm, appetite and hunger that drive to great action. Apart from being a reward on its own, passion ensures that one is working with boundless energy which leads to greater production.

Great Boss – Entrepreneurs work for the greatest boss on earth which is themselves. In paid employment, we meet all kinds of bosses – some nasty, some great and some boring. The greatest boss anyone would have is oneself. Entrepreneurship enables you work for yourself and that creates an unbeatable feeling which money cannot buy.

Hours – One of the immediate benefits of entrepreneurship is having control of one’s life. Though the beginning of entrepreneurship may be rough, the ability to be in charge and have the capacity to set your times and schedules for your work and business is a reward of inestimable value.

Location – Where you live and work is one key factor to personal satisfaction. Entrepreneurship helps you to make this choice and not have to depend on someone else determining your office location which may be so far away from where you reside leading to daily long commuting in public or private transportation. In Lagos Nigeria, where most corporate offices are located are too expensive for most workers to reside in. Some of such locations do not have residential areas. Employees are forced into long distance commuting and traffic hold ups that increase their cost of fueling and is the cause high blood pressure as a result of hanging out in the holdup year in year out. The entrepreneur can even keep his location virtual, meaning he may work from the comfort of his own home using the internet. An entrepreneur can also chose to be mobile.

Regardless of the risks associated with entrepreneurship, it is still the way for all those who wish to create wealth and find the greatest possible satisfaction in life pursuits.

Think about.

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