Types of Risks of an Entrepreneur

By
Vinay
 Introduction

Entrepreneurs are handle different risks
because they face a variety of risks while
carrying out their business operations.
Effective handling of risk ensures the
successful growth of an Entrepreneur /
organization.
 Meaning

According to the ‘Oxford English
Dictionary’, risk refers to “The
possibility of something bad
happening or expose to danger or
loss”.
Types of Risks
 Financial
Risk
 Financial risk is normally any risk associated
with any form of financing. Risk is probability of
unfavorable condition; in financial sector it is the
probability of actual return being less than
expected return.
 For example: non-payment by a customer or
increased interest charges on a business loan.


Financial Risk include:



Credit risk
Inflation
Cost risk
 Market
Risk
 Market risk is the risk that the value of an
investment will decrease due to moves in market
factors. The four standard market risk factors
are:


Interest rate risk (the risk that interest rate will change)
Equity risk (the risk that stock prices will change)
Commodity risk (the risk that commodity prices (for e.g.
crude oil, copper, etc…) will change)
Currency risk (The risk that foreign exchange rate will
change)
 Technology
Risk
It is th e p ro ce ss o f
m a n a g in g th e risks a sso cia te d
w ith im p le m e n ta tio n o f n e w
te ch n o lo g y in th e b u sin e ss.

Fo r e xa m p le : N e w Te ch n o lo g y
fa ilu re s in m a n u fa ctu re
d e p a rtm e n t.
Political & Economic
Risk

 The risk of loss when

investing in a given country
caused by changes in a country's
political structure or policies, such
as tax laws, tariffs (tax paid on
import or export), expropriation of
assets, or restriction in
repatriation of profits.
 Operational
Risk
 An operational risk is a risk arising from
execution of a company's business functions.
For example the breakdown of key equipment,
human error and technical failure.
 Environmenta
l Risk
 The risk associated with economic or
administrative consequences of slow or
catastrophic environmental pollution.
 For example: like disasters
 Tools used for
overcome from risk
ØR isk A vo id a n ce (eliminate)
ØRisk Reduction (mitigate)
ØRisk Transfer (outsource or insure)
ØRisk Retention (accept and budget)
 Risk avoidance: Includes not
performing an activity that could
carry risk. An example would be
not buying a property or business
in order to not take on the liability
that comes with it.

Risk reduction: Involves methods

that reduce the severity of the loss or
the likelihood of the loss from
occurring. For example, Modern
software development methodologies
reduce risk by developing and
delivering software incrementally.
 Risk transfer: Outsourcing
could be an example of risk transfer if
the outsourcer can demonstrate higher
capability at managing or reducing
risks.

Risk retention: Risk retention is a

viable strategy for small risks
where the cost of insuring against
the risk would be greater over time
than the total losses sustained.
Example: fire insurance.
 Low High
Frequency Frequency

Less
Severe Risk retention Risk reduction
Loss

More
Severe Risk Transfer Risk Avoidance

Loss
 Thank You
By ,
Vinay