Entrepreneurial Risk

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As most of us know what does entrepreneurship mean, it is taking initiative for starting up a business. The business may be of any kind but should be legally accepted by the court of the law.  When the word entrepreneurship comes to the mind , there is another word i..e – risk , that comes side by side. So what is this risk? Risk is the probability of the things going against the desired direction.

Entrepreneurial risk is the risk associated with starting up a business. And the suggestion for starting up a business is that one should take “calculated amount of risk” while going for entrepreneurship. This term calculated amount is itself a confusing term. Also people have a wrong perception of the word Entrepreneurship. So Entrepreneurship and calculated amount of risk are the two words strongly co-related to each other and like the two sides of a coin. First of all we will discuss about Entrepreneurship. If you ask anyone to be an Entrepreneur , the things that will come to his mind are- Huge investments, lots of time required to plan, its not of my type, very risky and so on. But entrepreneurship is not that. Only Ratan Tata, A Birla, Ambani brothers are not entrepreneurs,  It is also as simple as a “Paan Shop” near the bus stop, it is a small “grocery shop” near to your house, it is a small “laundry shop” which gets open only in the evening. The owners are all entrepreneurs. I will ask a question to the young educated unemployed society of India who are crying for job, are all these people more educated than you? , do they all have more money than you , do they all have more business idea than you? Absolutely not. But they have become entrepreneurs and many have succeeded well though many have failed too.

The success and failure of an enterprise depends on primarily how much risk you are taking. This is where people do mistake by taking more risk than what they should actually take. And statistics says nearly 50% of the total start up businesses fail within the first 2 years of incorporation even though having great business idea and lots of skill .That level or risk a person should take is known as “calculated amount of risk” and in fact this level varies from person to person and situation to situation.  The calculated amount of risk is that amount of risk , which would not push the entrepreneur some 20/30 years back if some hazards come in the way of his business. It is like riding a bike where there are people who drive  at a speed of 100- 120 Km ph and some people drive at a speed of 50- 60 Km ph. It all depends on the risk taking capacity of that person. Similarly taking a risk and starting up a business of worth 10 lakhs by a person having a total property of 15 lakhs may be more riskier than a person doing same having a total property of 50 lakhs. This same investment may be calculated amount of risk for the second person but may not be for the first person. This is what the basic risk of entrepreneurship is and that is the risk of investment .

If I categorize the risk in two broad segments, it will be Financial risk and Non-Financial risk. The risk we discussed above is all about financial risk.  Another aspect of the risk of entrepreneurship is Market risk. Whatever the product and service you provide, you have to depend upon the market. If the market is well and good then no need to worry, but if the market is unhealthy then you have to think when and where to start before starting up a business.

We have a wrong perception that only business is having risk, definitely not. Other professions are also having a lot of risk involved. For example there is no job guarantee in private sectors. There is risk of getting fired any time if the market gets worse, there is risk of the company getting shut down  and hence loosing job, there is risk of getting fired if you could not achieve the target in time and also there is always risk of loosing the freedom to speech inside the organization. If you take another example of a farmer doing agriculture in his own field, then also he is working with a lots of risk over his head. Like the risk of bad and un- favorable weather , risk of getting his crop stolen or destroyed, risk of crop eaten up by the insects etc. So risk is there everywhere in every profession or business. But the thing is how much risk we should take that depends on our capacity and will power and that is the so called calculated amount of risk.

Author:
Pradeepta Kumar Mohanty & Priyanka Chaudhary
NITK Surathkal – MBA 2012 Batch
About Me: Pradeepta is pursuing his MBA and in 4th semester now. He trying to start up his own business in a small scale after completing his MBA.

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19 Comments

  1. arkashree says:

    Nice one ..keep writting…

  2. Gourav Kumar Dubey says:

    I like ur article, outstanding…best wishes 4 ur future pri….!!!!

  3. Gourav Kumar Dubey says:

    I like every word of your article
    outstanding….
    best wishes for your next level pri….!!!!

  4. Payal Samanta says:

    Nice article, good flow… The article can include the point that market risk can be calculated by doing a good market research …. the last paragraph is very good. It’t true one must invest carefully according to his/her risk appetite. Good luck

  5. khushboo says:

    Great thought and well presented…quality information shared…thanks Priyanka

  6. Vikash says:

    Awesome article, a must read for anyone willing to startup a business.Have been summed up really well. Best wishes for further rounds.

  7. balaji says:

    Nice one… U made a lot of effort to prep dis one….

  8. pallishree das says:

    it is very much useful for market risk.really a great job. 

  9. Good attempt…gud luck further….  

  10. Nice one…Good work …All the bestttt 🙂

  11. Unknown says:

    Nicely put up….!!! Last paragraph caught the general purport of an article…. Best Wishes 4 next levels….

  12. RAJAT says:

    Each and every word used in the article is explained well.. Nice one

  13. Srikar says:

    It was a nice informative article on market risk.

  14. Pradeepta Mohanty & Priyanka says:

    Thanks All…
    Thanks Sourav
    Thanks Anjana…

  15. Sourabh Jain says:

    Well written, especially the last paragraph … 🙂

  16. Anup Kumar Avinash says:

    Good one, more knowledgeable for new entrepreneur about entrepreneurial risk.

  17. Amar says:

    quiet useful for prospective entrepreneurs.

  18. srinivas.t says:

    Good one…This article has content in it which has a good flow and nicely put up…!!

  19. Anjana K C says:

    Thanks for an informative write up..

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