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Entrepreneurship is all about risk management

Risk management a necessary tool for entrepreneurs to safeguard their business future. Risks are a part of businesses and entrepreneur must know what types of risks are there that might affect the functioning of the business and how to manage them.
BY Mr. P. PandurangaRao
Founder and Managing Director, DateScribeInfotechPvt. Ltd. and DataLifeHealth EMR
Jun 28,2017

A quote by Nora Denzel, interim CEO of Outerwall, says, If you dont take risks, youll always work for someone who does and that beautifully sums up the true spirit of entrepreneurship. What sets an entrepreneur apart is the desire to break away from the clutter and the natural ability to lead the team towards a unified objective.Considering the vast pool of resources in our country with such traits, it is not surprising to note that the start-up boom has inspired many entrepreneurial dreams.Every day we are exposed to a brilliant new entrepreneur with an idea that is worth millions of dollar, and we wonder in amazed that soon India will be an entrepreneur driven country. However, the harsh reality depicts a completely different picture, with 9 out 10 start-ups failing or unable to sustain their businesses, though it had ticked all the potential points to make it big in the market. The reasons for failure can be many but on a careful analysis, one can find the common thread that connects all the failed entrepreneurs is their inability to handle risk management.

What is Risk Management?

Risk management is the ability to foresee the possibilities and consequences of a business, analysing the same and deriving strategies to prepare, overcome or manage such events effectively. From a struggling start-up to established conglomerates, every business is threatened by challenges from time to time and a risk can arise from any business vertical including Strategic Planning, Capital Management, Operational Management and Human Resources Management to name a few.

Planning and Strategic Risk

Being an entrepreneur of a start-up, you are at risk of competing with established brands and conversely, an established brand is at risk of competing with a young start-up full of zeal and energy. As an entrepreneur, your brand is always at risk of losing out to competition and it is critical to consider key aspects such as understanding market needs, product or service offering, publicity and pricing. A synchronisation of all these factors synergizes your brand forward and compromising on any one of these aspects destabilises your strategic planning and puts your entrepreneurial dreams at risk from the beginning.

Capital Management Risk

As an entrepreneur, a shrewd management of finances goes a long way in defining and managing cash inflows and outflows. One should have the ability to allocate the capital to what is absolutely necessary and not necessarily necessary. For funded entrepreneurs, it is imperative to plan in detail the allocation of funding to enable all the processes of the business function in harmony. For example, a cash burn on marketing might affect operations, but on the contrary, a great product without marketing would not sell. So it is important to analyse and oversee the risk of capital allocation to each vertical of the business.

Operational Risk

There are various operational risks involved for an entrepreneur. For example, improper balancing of your systems and processes puts you at risk, dependence on a particular technology could put you at risk of it being obsolete in the future, underutilising or over utilising of your resources directly risks your finances. Being an entrepreneur, one doesnt have the luxury of limiting to a particular role but instead requires relentless attention on each and every aspect of the business, a quality that is proven among successful entrepreneurs over generations.

Human Resources Risk

We have all heard of the common phrase that people leave managers, not companies. As an entrepreneur, one should lead by example and be able to rightfully chose, handle and encourage the hierarchy of the company. A resourceful company can easily fall apart if the people involved are not in the right frame of mind. On the other hand, attrition of talent is a common risk that affects most companies. To flourish as an entrepreneur, you should be able to retain your talents with recognition and rewards but on the other hand, should plan to minimise the risk of being dependent on a particular set of people.

Conclusion

Apart from these, a business has many other risks including compliance risk, security risk, adaptability risk, brand reputation risk and the list goes on. The point is if you have the ability to anticipate, acknowledge, allocate, minimise and eliminate the risks, you might be a right fit to be an entrepreneur. Business without risk is like farming without water and for a true entrepreneur, it is not the success he savours the most but the journey in between.

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