The Concept of Risk as It Relates to Business: What is RisK?:

Globally, new businesses ventures are undertaken every day. Many of them appear to be risky or even ludicrous, especially at first.

Understanding the element of risk, as it relates to business ventures is important in terms of effective business management, as well as the success of a business. 

‘Nothing ventured, nothing gained’ is an old adage that entices business owners and entrepreneurs to attempt something new and different, regardless of what others think or say. There is always some degree of risk associated with every business venture, particularly new ones.

What is risk?

Business dictionary.com suggests that risk is “a probability or threat of damage, injury, liability, loss, or any other negative occurrence that is caused by external or internal vulnerabilities, and that may be avoided through preemptive action.”

Consider the following examples.

A freelance writer takes on an Internet business venture related to a specific project, with the risk of his or her research disappearing. A banker takes on the financial risk of loaning money to a farmer who is unfamiliar with raising cattle. A company continues to refine petroleum products, knowing that many of them are volatile. A retailer expands a business, aware that the competition is fierce.  

Initiating business ventures, in spite of the element of risk is vital to success and ongoing progress.  No new businesses have a guarantee of success, although they may appear to have a high likelihood of success. In other words, risk is part of business ventures, even if it is not immediately evident.

Risk has always been part of business ventures since the beginning of time, but the nature of risk may undergo transition over time. In other words, different eras bring about changes in the element of risk in business ventures. 

For example, the threat of a shift in the global economy may present major risks for new business ventures. Natural disasters also present potential risks for business ventures. Consider the radical climate changes that lead to increasing numbers of hurricanes, tornadoes and floods. Risk always plays a huge role in technology and business ventures, particularly those based on new technological changes or advances, In other words, businesses have a built-in element of risk.

How can you reduce the risks associated with your new business venture?

There are things beyond human control while on the other hand, entrepreneurs who are innovative, proactive and motivated with respect to positive, constructive development of new business ventures reduce their risk. When success is the focus of a business, an entrepreneur will find a way to succeed.

Many business ventures start on a trial and error basis. Appropriate research is an important aspect of starting new business ventures, because it can help to avoid pitfalls and increase the risk of success. Obtaining appropriate financial counseling and sufficient financial backing can help to reduce the element of risk. Insurance is another factor to consider.

Who are the risk takers? In new business ventures or even in older, well-established businesses, risk takers are those continue to break down barriers and seek innovative solutions.

In any entrepreneurial ventures that you choose to undertake, knowing the people or organization you are dealing with can help to reduce your element of risk. Do you have a built-in back-up plan? You could become an entrepreneur and start your own business or chain of businesses. At the same time, it is important to weigh your odds and prepare to deal with the element of risk.