The Entrepreneur’s perception of risk

Entrepreneurs use, in general, calculated risks for pursuing certain opportunities. Since entrepreneurs are human, not robots, a touch of subjectivity makes their endeavor more exiting. This subjectivity is reflected in something called “a gut feeling”, that entrepreneurs use to help making decisions.

Keep the bulls in your mind

In the entrepreneur’s mindset, risk and opportunity are an inseparable pair. This is exactly like the two bulls in the picture, we called them “Risk” and “Opportunity”. For a perfectly aligned plow, the pace of the two bulls remains the same, and every time the bull Risk decides to stop, immediately the bull Opportunity will stop, and vice versa.

This means that, in your business, the more the opportunity is important, the more the risk associated with it is big. If you see that the risk you’re taking is not related, or is bigger than the opportunity you’re pursuing, you’re probably wasting resources, and might need to review your strategy.

Ways to deal with a risk

For every viable opportunity, the entrepreneur should be able to bear the risk associated with it, transfer it, or have a mitigation plan to that risk. It is however worth keeping in mind that being overzealous in calculating the risks delays the objective achievement, or keeps the person stagnant.

Now, let’s understand the ways to undertake* the risk.

As we mentioned above, that there are three ways to deal with a risk:

  1. Accepting it.
  2. Mitigating it
  3. Transferring it.

 

Accepting the risk:

This is when you find that you can bear the risk and there is no way to run away from it if you want to pursue your opportunity.

Mitigating the risk:

This is when you take the necessary action to reduce the negative effect of the risk down to a manageable level.

Transferring the risk:

This is when you use another party to take the risk on your behalf. Example: buying an insurance policy.

What about you?

Are you one of those who take calculated risks, or, you shoot… then you aim?

 

The asterisk

If you’ve noticed, the asterisk we added right after the word “undertake” was not a typo.

“Entreprendre” means undertake in French which is the verb for entrepreneur “Undertaker”. Interesting, isn’t it?

 

Wrapping up

  • Whenever there is an opportunity, there should be a risk associated with it;
  • In general, entrepreneurs take calculated risks;
  • Being overzealous in calculating risks delays the goal attainment, or keeps stagnant;
  • There three ways to undertake the risk: Accepting it, mitigating it, or transferring it.

 

Good luck with you endeavor,

B.M. for Vamaks,