Entrepreneurial risk is, first of all, responsibility

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Production and commercial activities always carry certain risks. Of course, the leader, the entrepreneur is responsible for the decisions made. Therefore, it is always necessary to take into account the saving of financial and material resources. Calculations for projects and transactions should be carried out very carefully. This rule is especially relevant during the financial crisis, high inflation, large loans.

Entrepreneurial risk is…

In case of errors in calculations, management decisions, the developed projects do not bring profit, on the contrary, the company incurs losses. This result of activity is entrepreneurial risk. It can be divided into three components: investment, financial and production.

Entrepreneurial risk is a mistake, the consequences of which are expressed:

• in a complete stop of the enterprise;
• non-receipt of raw materials, materials for production;
• at the risk of non-sale or incomplete sale of manufactured products (lack of demand for services);
• untimely or complete non-receipt of funds from product distributors;
• at risk of returnmanufactured and sold products;
• at risk of non-compliance with credit, investment and loan agreements;
• in the bankruptcy of both the institution itself, the company, the firm, and its partners,



suppliers.

Types of business risks

The classics of fundamental science put a lot of features in the basis of classification. But entrepreneurial risk is a concept that requires the most precise definition of its types. Therefore, it is customary to consider three types of risks to be fundamental. These include:

1. entrepreneurial;
2. creditor;
3. cash.

Entrepreneurial risk is the risk of circumstances that stop the operation of the enterprise if personal funds (finance) are invested.

Creditor risk is the risk of non-repayment of borrowed funds. Such a situation may arise as a result of the bankruptcy of the borrower, both intentional and involuntary.

Money risk is the risk of depreciation of the money supply. That is, it is always more profitable to lend tangible assets.

Entrepreneurial risk is a direct dependence of profit margin. For example, when purchasing short-term bonds, one should not rely on rapid capital growth. In contrast, the common stock, which has the lowest safety margin, has the highest capitalization.

Entrepreneurial risk area

To develop ways out of bankruptcyTo some extent, to manage business risks, it is necessary to understand in which area of risk the enterprise is located. They are usually divided into four main ones:

1. risk-free;
2. tolerable risk;
3. crisis;
4. catastrophes.

First area has no loss character, operations bring standard profit, no borrowed capital.

The second area assumes that losses are tolerable compared to profits, the company's activities remain viable both in the market and financial sense.

Third, expected losses outweigh potential gains. Entrepreneurship leads to bankruptcy.

Disaster area. The name speaks for itself. Losses exceed the crisis level and amount to the value of the enterprise itself.