1.3.9

Risk & Uncertainty

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Risks

The entrepreneurs that start businesses face a lot of risk. Some of the risks are:

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Risk of failure

  • Starting a new company is very risky as they are most likely to fail in their early days.
    • They face the risk that consumers may not want to buy their product, especially if it is a brand new product.
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Financial loss

  • Starting a new business often requires a lot of investment. Failure can often mean a large financial loss for the entrepreneur.
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Lack of security

  • Entrepreneurs often lose the security that they had with their job in terms of a regular wage or salary.
    • This means that if the business isn’t making any profit, the entrepreneur may have no money to live off.

Uncertainty

Uncertainty is not identical to risk.

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What do we mean by uncertainty?

  • Uncertainty is when a business cannot know how a situation will turn out.
    • This is mostly because the business does not have enough information.
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Brexit

  • Brexit has caused uncertainty for businesses.
  • This is because they do not know how they will be affected by Britain leaving the EU.
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Uncertainty vs. risk

  • Uncertainty is where a business is unable to foresee problems.
  • Risk is where there is a chance that something could go wrong & not end up as expected.
  • With uncertainty, it is hard to even have any expectations of what the future will be like.

Jump to other topics

1Exploring Business

2Marketing Campaigns

3Business Finance

4International Business

5Principles of Management

6Business Decision Making

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