Types of Risks

1.Financial Risk (access to finance, unexpected cost)

2. Economic Risks (changes in income, customer tastes
or interest rates)
3. Health and Safety and environmental risk (law and
regulations, operations)
4. Human Resource risks (having the right skills and
number of people)
5. Production risk (access to right materials, machine
breakdowns)
Steps of risk Management

Step 1: Identifying
Risk
 Identifying external risks that the enterprise has no
control over
Using
SWOT
analysis
Using PEST analysis
Steps of risk Management

Step 2: Analyse the

implications of risk
Chances of happening

Potential
consequences of the
risk materialising
Steps of risk Management

Step 3: Decide
whether the risk is
worth it
Attitude to risk so will completely depend upon the
entrepreneur
Risk attitudes:
risk averse
risk keen
risk reducer

Using the information gathered in step 2, a decision has

to be made about what risks are worth taking; at this
point the entrepreneur will decide if some risks are too
high and the project should be stopped.
Check learning
Steps of risk Management

Step 4: Plan to
manage the risk
If project carried on, decision as to how to deal with
each significant risk has to be made
Ways to mitigate or reduce risk

Detailed research
consultation
planning
diversifying risk
Steps of risk Management

Step 5: Monitor the

risk
Review and reassess risks
changes in external and internal factors
respond and change ways for positive outcomes
 Legal Obligations
Part of SWOT and PEST analysis
Done by the governments to deter exploitation

Contracts include terms of job, problem and conflict resolution

Employment : Minimum wage
Unfair treatment

Production: Health and safety laws

Marketing and Selling: Careful about product descriptions and marketing as laws to protect
customers against misleading marketing and faulty/damaged product

You should know

Finance: Offering and providing
finance/ dealing with the impact of these
funds to be done with
correct documents on business
Ethical Considerations
Being ethical goes beyond just
benefitting the owner via profits; it
includes thinking about impact on other
stakeholders too.
Profit v/s Ethics
for example:
Paying higher wages may be ethical but
reduces profit by increasing cost.
Merits and Demerits of being ethical