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Why an entrepreneur takes risks?

The key which leads to a successful business is when an entrepreneur takes risks. If you’re not willing to take risks, you should rethink the option of setting up a business. When an entrepreneur takes risks, it is not about getting into the business blindly. The process is about proper planning and hard work.

Why an entrepreneur takes risks?

You will no longer ask yourself, “what-if.”

At times you may not be sure about the results, but this shouldn’t stop you from taking the risk. An entrepreneur takes risks because it is a necessary step that leads to a successful business. If you want to progress, you should take risks through the process. Sometimes we lose opportunities when we are too scared to opt for the option which involves risks.

You learn from taking risks.

Some risks may not pay off well. But when an optimistic entrepreneur takes risks, and it doesn’t go well, he learns from the failure. As talked earlier in our article “The 30/70 Rule of Failure,” failure is not meant to be an endpoint. You always learn from situations, get to know where you go wrong, and improve for better growth.

Options for innovation and opportunities

Change is constant. Innovation requires exploring new options and working for better opportunities. Your customers always have different demands, and you must adapt accordingly. It is about working with new practices that lead to progress. An entrepreneur takes risks as a cost of innovation and opportunities when the risk is properly evaluated and planned; the level of risk decreases.

When you take the risk, you have a competitive advantage

Every person is not a risk-taker. It takes a lot of potential and courage to step into something with uncertain results. There are high chances of being the only business entrepreneur in the market who takes risks for any opportunity. This way, you stay ahead of your competitors who may not be willing to do the same. When an entrepreneur takes risks, he gains a competitive advantage and benefits after jumping in the risky sea.

What types of risks exist?

The term “risk” comes with different levels and uncertainties. A business owner might experience the following type of risks:

  • Market Risk

Market Risk is associated with the changes going on in the market. It is also known as systematic risk. Every business needs to evaluate the changing pattern of the market since it never stays the same. A business owner should always look for consumer’s tastes and preferences, have detailed market research, and promote his products. It is important to know the conditions of the market and economy, which helps with better growth opportunities.

  • Competitive Risk

One of the initial steps for starting a business is looking for your competition. Competitive risk is defined as direct or indirect competition, which affects your revenue and business. This may exist because of competitive advantage in price, market strategy, or product specification. The level of competitive risk is higher for startups. When a new entrepreneur takes risks, he should perform a SWOT analysis and make strategies accordingly.

  • Credibility Risk

Credibility Risk is associated with a situation when a business introduces a new product in the market. Most of the time a brand image is attached to your company’s name. 59% of the customer prefer to buy products from a brand they’re familiar with, and 21% buy a product because it is from a brand which they already like. To manage credibility risk, a company should work on its marketing skills and be active on social media. Another factor could be working on the quality of your product and services.

  • Technology Risk

Technology Risk is referred to as the risk of losses that a business owner faces because of technology failures. It can be caused by loss of sales due to a crashed website or some theft in the database. In this era of technology, a company’s system should always be up to date. There should be regular maintenance and security checks to ensure that everything is on track.

  • Financial Risk

Financial risk is linked with the risk which a company faces due to insufficient cash flows and financial obligations. It is not only associated with less revenue but also with sources and amounts of funding. A business should always look for the rate of return and stake of business while choosing an investor. The important step is to plan out your financial activity and work accordingly.

Steps to manage risk

Risk can never be avoided, and this shouldn’t stop you from exploring more options. You can always find ways to reduce unnecessary risk and build a management plan. The following steps could be taken when an entrepreneur takes risks:

1. Identify your risk

Observe and know about the types of risk which you cannot control.

2. Act

Always plan out 2-3 immediate steps to reduce unexpected risk. If it is something like, market crash, this can save you from getting into too much trouble.

3. Assign responsibilities to employees 

There should be a department for risk management in your company. Employees should know about possible risks present and how to tackle them. This can make your risk management plan to be executed successfully.

4. Document the risk

You should always keep a written document on how to deal with risk. It should also mention how the company overcame the risks it faced.


We all go through a certain risky situation at some point in our lives. COVID-19 has put most of the businesses in uncertain places where they are forced to take risks. The important part is whether you’re taking the right risks. The main point is not to take risks at every turn, but it is about calculating the risk first. The risky situation should be thoroughly analyzed, and unnecessary risks should be avoided.

We, at Oak Business Consultant, are specialized in providing consultation on these matters. We have helped several companies in building a robust financial model and business plan along with Pitch Deck. Therefore, you can visit our website Oak Business Consultant to consult with us for free.

Oak Business Consultant has helped many Start-up and SME’s for the preparation of Business Plan, Financial Modelling, and Financial Consultancy.

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