Entrepreneurship involves the possibility of various risks. This is due to the fact that market reality is constantly changing, and its future is assessed as uncertain. Therefore, one cannot be 100% sure that the expected results will be achieved. Every businessman, especially a novice, should take into account possible situations that may arise in conditions of economic uncertainty. All this makes up such a concept as entrepreneurial risk.
The market is economic freedom. But the freedom of one entrepreneur is adjacent to the freedom of another, and something needs to be paid for it. In this case, reckoning is entrepreneurial risk. One businessman is free to buy or not to buy this or that product at the prices set by the seller, or at the price that he himself will impose during the auction. Each in economic relations strives exclusively for his own benefit, and in some cases, profit for one means loss for the other. As for competitors, they are even interested in ousting each other from the market in general.
These circumstances increase the likelihood of unforeseen events, which as a result translate into entrepreneurial risk. The influence of the external environment cannot be ruled out. It implies social, economic and political features and changes that cannot be ignored. The presence of risk situations does not mean at all that you need to leave the market. It is necessary to further develop and analyze possible methods to reduce risks, as well as successfully apply them.
The history of entrepreneurship in countries with market economies is rich in examples of rapid ups and downs, successes and failures. Therefore, in such harsh conditions, it is necessary to learn the rules of market behavior, given the uncertainty and unforeseen situations. In the broad sense of the word, risk is a danger or a possible threat of loss or loss.
Entrepreneurial risk is specified specifically for the characterization of economic activity and is defined as one that is possible in the production and sale of goods and services related to commodity-money transactions, as well as investment projects. It can manifest itself in a partial or complete loss of either resources or cash as an investment or profit.
The manifestations of risk are diverse. This can be fires, natural disasters, ethnic conflicts, wars, changes in the legislation of regions and countries, as well as crises and jumps in inflation. Different types of risk are distinguished depending on the causes.
Studying the risks and their manifestations allows developing measures to reduce them, which are aimed at reducing the likelihood of their occurrence, as well as at reducing the volume of losses. The most common are the following: insurance, diversification, hedging.
- Compensate for the consequences of insurance. Risks vary depending on the sphere of entrepreneurial activity, therefore, various types of insurance are applied, including personal (if necessary) for employees of the organization. The insurance of banking or financial, as well as risks from foreign trade, is separately considered.
- Diversification involves the separation of capital and its subsequent distribution to various objects that are not interconnected.
- Hedging involves insurance by moving from one person to another the risk associated with a future change in price.
The existence, development and change of risks has led to the fact that their management has become a separate professional industry in which qualified insurance specialists and financial managers work. Therefore, one can note the positive side of this phenomenon, which provides additional opportunities for the realization of a person in the labor sphere.