•The risk always exists.

•The risk is your failure to reach your

goal, this is the degree of failure
(success) compared to the planned
results.

•Risk is loss.
• LO: To understand the essence of risks
The risk of doing business is always there.

What is 'Business Risk'?

Business risk
Risk is the probability (threat) of the entrepreneur's loss of his resources, the
threat of shortfalls in his income or the threat of additional costs arising from
the implementation of certain production and financial activities.

•What makes an entrepreneur take risks?

What do you think are the risks
associated with the current pandemic
situation.
• Use PEST analysis!!!
WHAT ARE THE CAUSES OF RISK?
Business risk is influenced by numerous factors
Sources of risk situation
PEST
Political instability, government
regulations
Economic and financial crisis, high
rates of inflation, non-price factors
of demand
Activities of your partners,
competitors, suppliers; growth of
the criminalization of society
Technological changes
The product can deteriorate as a
result of sudden changes in weather
conditions
Business Risk Factors
Changes in legislation in the field of business, a sharp deterioration in
the political situation, the war, the overall economic climate, Exchange
Rates, change in the trade rule, in the tax regime
The goods or resources are not delivered on time, sales volume, per-
unit price, input costs, competition, changes in consumer tastes
Irresponsibility of economic entities, deceit (fraud) /criminal acts of
someone, death or incapacity of key employees, low level of
entrepreneurship education
Inability to adapt to new technologies and change your business
model
losses due to natural disasters (fire, water, earthquakes, hurricanes,
etc.)
Task:

•Distribute the considered situations to

the factors of external and internal risks.
 External and internal risks
External factors Internal factors
• Economic crisis • the entrepreneur himself, his competence, level of
• Growth of criminalization of society knowledge, level of personal claims;
• High inflation rates • personal characteristics of the entrepreneur as the owner
• Political instability of the firm;
• The irresponsibility and irresponsibility of economic • The composition of partners creating their own
entities business, their business activity, their dedication to
• Changes in legislative and regulatory acts governing common business;
business activities • the composition of employees, their qualifications and
• Lack of personal responsibility of a significant part of material incentives;
entrepreneurs for the results of their activities, which • level of entrepreneurial culture;
increases the "moral" risk of any transaction • protection of entrepreneurial secrets;
• The dependence of the entrepreneur on the criminal • organization of management and production;
world, the inability and unwillingness of law enforcement • marketing research and market research;
agencies to protect him • level of the organization's solvency and timeliness of
• Unstable tax legislation settlements with creditors and budgets of all levels;
• Unfair competition • quality of products (works, services), etc.
• Low level of entrepreneurs' education on the problems
of the market and entrepreneurship, etc.
Внешние факторы, влияющие на уровень
предпринимательского риска, подразделяются на две группы:
• Факторы прямого воздействия и факторы косвенного воздействия.
Факторы прямого воздействия непосредственно влияют на результаты
предпринимательской деятельности и уровень риска. Факторы
косвенного воздействия могут не оказывать прямого влияния на
предпринимательскую деятельность и уровень риска, но способствуют
его изменению.

• Factors of direct impact and indirect effects.

Factors of direct impact directly affect the results of entrepreneurial
activities and the level of risk. Factors of indirect impact may not
have a direct impact on business activities and the level of risk, but
contribute to its change.
 System of external factors affecting the level of entrepreneurial risk

Factors of direct impact   Factors of indirect impact  

Legislation regulating business activity. Political conditions.

Tax system. The economic situation in the country.

 
Mutual relations with partners.  Social situation in the country.

Competition of entrepreneurs.  International events.

Corruption and racketeering.  Natural disasters.

Unexpected actions of state bodies and  

institutions.
 The Main Types of Business Risk
•Strategic Risk arises when the implementation of a business does not go
according to the business model or plan. A company's strategy becomes less
effective over time, and it struggles to reach its defined goals. If, for
example, Wal-Mart strategically positions itself as a low-cost provider and
Target decides to undercut Wal-Mart's prices, this becomes strategic risk.
•Compliance Risk - This type of risk arises in industries and sectors highly
regulated with laws. The wine industry, for example, must adhere to the
three-tier system of distribution, where it is a requirement for a wholesaler
to sell wine to a retailer, who in turn sells it to the end consumer.
 The Main Types of Business Risk
• Operational Risk - So far, we’ve been looking at risks stemming from external events.
But your own company is also a source of risk. Operational risk refers to an unexpected
failure in your company’s day-to-day operations. It could be a technical failure, like a
server outage, or it could be caused by your people or processes.
• Financial Risk - Most categories of risk have a financial impact, in terms of extra costs or
lost revenue. But the category of financial risk refers specifically to the money flowing in
of your business. For example, let’s say that a large proportion of your revenue comes
from a single large client, and you extend 60 days credit to that client, but he is unable to
pay, or delays payment for whatever reason.
Having a lot of debt also increases your financial risk.
Financial risk is increased when you do business internationally - The exchange rates are
always fluctuating, meaning that the amount the company receives in dollars will change.
 The Main Types of Business Risk
• Reputational Risk - There are many different kinds of business, but they all have one thing in
common: no matter which industry you’re in, your reputation is everything. If your reputation is
damaged, you’ll see an immediate loss of revenue, as customers become wary of doing business
with you.
Your employees may get demoralized and even decide to leave. You may find it hard to hire good
replacements, as potential candidates have heard about your bad reputation and don’t want to join
your firm.
Suppliers may start to offer you less favorable terms.
Advertisers, sponsors or other partners may decide that they no longer want to be associated with
you.
Reputational risk can take the form of a major lawsuit, an embarrassing product recall, negative
publicity about you or your staff, or high-profile criticism of your products or services.
 Opening a business, you need to determine the losses
that will be acceptable, critical and catastrophic for you.
• Admissible risk is the threat of incomplete loss of profit from the
implementation (non-fulfillment) of your activity. For example, you planned
to profit from the resale of goods in the amount of 100 000 tenge, and
received only 30 000 tenge of profit.
• Critical risk is characterized not only by the loss of profit, but also by the
inadequacy of the anticipated revenue. The risk can be considered critical if
the loss of net profit threatens to reach 75%. For example, you planned to
sell goods worth 300,000 tenge, and sold only 100,000 tenge.
• Catastrophic risk, as a rule, leads to bankruptcy, that is, to the loss of all
means by the entrepreneur. For example, you bought goods worth 300,000
tenge and did not sell anything.
Activity: Can you avoid the risk?

• Lease of equipment (to choose from).

• Manufacture of chemicals against rodents for public catering or
for processing fields, gardens, orchards.
• Internet sales.
• Production of salads.

1. Identify three possible causes and main types of risks that your
business can be faced to?
2. What measures can you take to reduce the risk and minimize its
impact?
You can reduce risks if you learn how to manage them.
The process of risk management includes the following consecutive stages:

• Study\research what is happening in the market and the

environment around you
• Consider what potential threats to your business exist
• Calculate what the amount of your losses can be
• Think about what to do if threats arise in real life and
what should be done to avoid losing
• Calculate the costs associated with the preliminary
assessment and risk management.
 In order to minimize risks, you can:
• leave a certain amount of funds to cover unforeseen expenses - create a reserve
• transfer risk to someone - insure
From fires (ignition from internal causes, lightning, explosion, falling of
flying objects)
From burglary and robbery
From the storm (in the insurance policy there is an accurate definition of
the concept of a storm, for example, the minimum wind strength is 8)
Cargo insurance
From production downtime (compensation of costs for wages, rent ...)
• redistribute risks between activities or groups of goods and services
• avoid - to abandon any of your ideas or activities
• conduct preventive measures - gather information, train staff, etc.
 Для того чтобы минимизировать риски, Вы можете:
• оставить какое-то количество средств на покрытие непредвиденных расходов — создать резерв
• передать риск кому-либо — застраховать
От пожаров (возгорание от внутренних причин, удар молнией, взрыв, падение летающих
объектов)
От кражи со взломом и ограбления
От шторма (в страховом полисе имеется точное определение понятия шторм, например,
минимальная сила ветра – 8)
Страхование груза
От производственных простоев (компенсация затрат по заработной плате, аренде…)
• перераспределить риски между видами деятельности или группами товаров и услуг
• избежать — отказаться от какой-либо Вашей идеи или деятельности
• провести предупредительные мероприятия - собрать информацию, обучить персонал и т.д.
Video: Risk Assessment Animation

• https://www.youtube.com/watch?v=b9ybnzAFBjw