Risk In Entrepreneurship : What Risks Do An Entrepreneur Face?

risk in entrepreneurship

Risk in entrepreneurship is unavoidable and is actually an essential part of it. Every successful entrepreneur is a risk-taker and knows how to deal with risks at the right time. This makes entrepreneurs naturally risk-takers as they calculate the risks with the right vision for taking the business forward. However, at the personal level as well, entrepreneurs take the risk of leaving their jobs for business.

In this article, you will generally learn about what are the major types of risks that are present in entrepreneurship. However, apart from that, we will also share with you what risk means in the context of entrepreneurship and what its importance is to the entrepreneur. Hence, to learn more about risk in entrepreneurship read on through to the end of the article.


What Is A Risk In The Context Of Entrepreneurship?

What Is A Risk In The Context Of Entrepreneurship

An entrepreneur’s life is full of risk. Actually, it starts when the individual decides to build a business from the ground up. In the first instance, the word “risk” basically represents a situation of unpredictability and chaos. However, in the context of entrepreneurship, this word has a different meaning.

According to Hubspot.com,

Risk-taking in entrepreneurship is the process of identifying, evaluating, mitigating, and trying out potential opportunities and strategies that may help you build or grow your business but could also lead to personal or professional loss.

Risk in entrepreneurship is always calculated, and an entrepreneur needs to measure the risk with proper planning and assessment to keep the business on track.

When it comes to entrepreneurship, you will need to understand here that entrepreneurs do not have a guaranteed monthly income and no guarantee of success. Apart from that, they also risk their work-life balance as they do not have enough time to spend with their families and close ones. Hence, each day is a challenge for these entrepreneurs.

Read More: How To Become An Entrepreneur? – Steps To Follow

Importance Of Risk In Entrepreneurship

Importance Of Risk In Entrepreneurship

According to FirstRepublic.com,

Successful entrepreneurs tend to be willing to take chances, as pursuing a new business venture often involves taking calculated risks based on extensive research. Such research takes a great deal of time and energy but allows potential business owners to better understand several types of entrepreneurial risks.

Being an entrepreneur is in itself a risk. Despite having a dream of running a business, most people never become an entrepreneur just because they do not want to risk losing their job. In addition to that, 70% of startups fail within the first year itself, as they fail to take risks at the right time or are unable to deal with the risks in front of them.

Because of the significant risks involved, entrepreneurs can strategize as per the method of their work. This might be a method that no one took advantage of. If the entrepreneur is successful in this new method, then it will be a discovery of a new strategy. This is how the entrepreneur creates a niche for the business, and hence the business works without any competitors for some time.

The main thing about entrepreneurs is that they are not afraid of trying new things. However, they can do that since they look at problems differently, as they see them as opportunities to cash in on. They have a knack for exploring those unexplored avenues.

Risk In Entrepreneurship – Major Risks For Entrepreneurs

Risk In Entrepreneurship - Major Risks For Entrepreneurs

The following are the major types of risks in entrepreneurship:

1. Financial Risk

According to Investopedia,

Any new business should have a financial plan within the overall business plan showing income projections, how much cash will be required to break even, and the expected return for investors in the first five-year timeframe.”

Hence, the entrepreneur needs to put the finances properly into the business. For this to happen, proper planning and risk assessment is required. Failure to plan properly can lead to bankruptcy and losing all finances.

2. Strategic Risk

If the business is planned properly, it will attract investors surely. However, a strategy might get outdated as the world is becoming more fast-paced and dynamic. With market changes and changing business environments, a strategy can be proved wrong pretty quickly. The company might thus fail to reach its targets.

3. Technological Risk

With the constant change of technological forces and with emerging new technologies, there are several risks for the entrepreneur on this front. Some of these technologies are called “paradigm shifts” or “disruptive” technologies. To stay relevant in business and to cater to changing demands, entrepreneurs need to invest heavily in new tech systems and processes.

4. Market Risk

The market is unpredictable and always poses a risk for the entrepreneur. A certain product that is popular now can get outdated after a few months. This becomes more once a competitor launches a similar item at a lower price. Hence, analyzing and researching the market is important for the entrepreneur.

5. Risk Of Competition

Talking about competition in the market, having full awareness of the strengths and weaknesses of the competitors is extremely important for the entrepreneur. Furthermore, if you have come up with a new idea or innovation, you must protect that with patents too.

6. Risks Of Reputation

To stay in the market for the long run, a business needs to protect its reputation at all costs. This is especially true for new businesses, where they need to fight judgments and preconceived notions in the market as well.

7. Economic, Political, And Environmental Risks

These are unavoidable problems, and hence entrepreneurs need to be fully prepared in this regard with the right insurance.

Read More: What Is Indemnity Insurance ? And Its Different Types – Let’s Discover

Way Forward

Any risk in entrepreneurship is important, and it is important for entrepreneurs to improve their risk-taking capability. If you want to become successful with your entrepreneurial venture, you will need to have a strong risk-assessment framework. This will allow you to identify your risks better and come up with the best mitigation methods of the same.

The best way to start is to take small risks and build a culture in the business where smart risk-taking is praised. Do you have any better recommendations on how to handle risk in entrepreneurship? Share your views with us in the comments section below.

Read Also:


Please enter your comment!
Please enter your name here