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Imagine See all. Most people are not willing to take risks, but a study on risk-taking revealed that there is a link between willingness to take risks and personal satisfaction.
Avoiding unnecessary risks and saying no to new ones based on past experiences can be just as satisfying. Risk is often used as a blanket term when describing decisions made under various levels of uncertainty.
Instead, you want to understand the type of risk you are taking and how it can affect your business. Market risk, also known as systemic risk, refers to the risk of loss due to fluctuations in the market. To mitigate this risk, an entrepreneur should develop and implement various strategies that inform you of potential changes or disruptions.
The end result should help you better understand your audience, the available market, and if you need to pivot the focus of your product or service. Competitive risk refers to the chance that direct or indirect competition impacts the revenue or margins of your business. This is often due to competitive advantages in product specifications, price, or marketing strategy. This type of risk is higher for startups since they usually face competition with companies that have established their presence in the market several years prior.
An entrepreneur can minimize this risk by conducting a SWOT analysis and come up with strategies to counter their competitors. Credibility risk refers to the risk that an entrepreneur faces when putting out a new product or service in the market. The credibility of a brand name helps greatly in establishing a business and can influence the purchasing decisions of potential customers.
According to a study , approximately 59 percent of consumers prefer to buy new products from brands that they are familiar with, and 21 percent report they bought a new product because it was from a brand they like. To mitigate credibility risk, there are several strategies to consider. Technology risk refers to the risk of losses that business owners face due to technology failures. For example, lost revenue due to the crash of your eCommerce website, a security breach resulting in the theft of customer data, or failing to transition employees to working remotely due to a lack of available tools.
The best way to minimize this risk is to invest in up-to-date technology that is both affordable and reliable. Regular maintenance and security checks should be done to ensure that everything is running smoothly and all customer data is protected.
This is easily the biggest concern for most business owners as cash flow defines the health and stability of your business. Taking risks is closely linked with entrepreneurship. You may be leaving a steady-paying job, risking your reputation with new products, and adding financial risk with a loan or investment. On top of that, there are risks involved in hiring employees, marketing strategies, and even customer service. Instead of being discouraged or aimlessly moving forward, you can instead work as a calculated risk-taker, who carefully takes steps toward your goals.
Risk is inevitable, but by understanding that you can find ways to reduce unnecessary risk in your business and develop a risk management plan. The scarier something feels, the riskier it must be. But that's not an accurate way to gauge risk. After all, driving a car probably doesn't feel risky. But giving a speech in front of a large crowd might feel like a huge risk. Yet your chances of injury or death are much higher when you're behind the wheel than if you're onstage.
So before you talk yourself out of doing something that feels risky, spend a few minutes thinking about the actual level of risk you are up against. Ask yourself, "What risk do I actually face? How can I handle it if it doesn't work out? There are lots of steps you can take to reduce the risk that you face. Maybe you decide to spend a lot of time practicing a speech before you deliver it. This could increase your chances of success. Or maybe you decide to wait until your side hustle is consistently delivering income before you quit your day job and become an entrepreneur.
This might be a wise, calculated risk to take.
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