The role of risk in the life of a young entrepreneur
INTRODUCTION
The life of a young entrepreneur can be fascinating. It is full of creativity, new opportunities, and a lot of dreams for a successful future.
Most of the time though, the road to success is not easy. Entrepreneurship is a risky business. Problems can arise anytime from every corner and make you question your choices and future steps; how ready is your idea? how well-funded is your project? do you have a good knowledge of the field? Are you operating in the right environment? Are your partners worthy of your trust?
There are many uncertainties and risks a young entrepreneur needs to have in mind before starting-up a new business.
In many occasions, a young entrepreneur might need to take a decision they might not be certain about. This can be intimidating for someone on their initial entrepreneurial steps.
As a young entrepreneur, you should not be afraid of those risks. Methodically, you can write down and map every source of uncertainty and, before worrying too much about it, you will have a clear picture of all risk and threats of your enterprise. With confidence and focus to success, commitment, and hard work, all risks can be encountered.
TASKS
The goal of this WebQuest is to encourage you to cope with and identify the uncertainty and risks a young entrepreneur will face in the initial stages of their entrepreneurial journey. As a young entrepreneur, you will go through different steps to map all possible risks that can affect your enterprise from achieving its goals.
You are a young entrepreneur living in a Rome and you are starting-up a new business in the field of accounting. You have an innovative idea compared to what is already available in the market. In order to protect it, together with your investment and overall effort, you need to look for the factors that could pose as threats to your project.
To begin, together with your team you will need to define what risk is and get motivated to face risks with confidence. You will also set your objectives which will guide you throughout this journey, and by using the SWOT Analysis you will better map your idea. With this preparation you will have enough tools to list all possible risks your enterprise might need to encounter.
PROCESS
Step 1. What is risk?
Before starting to look for the risks to your enterprise, you need to define what risk is, and which area could include a risk for you.
Write down separately from your team members a definition of what risk is. Try to come up with a definition that will be applicable in all situations and not just in that of your project.
Watch the following video to better understand what risk is and how it can affect your enterprise:
To finally get the answer, check this document out for the definition of “risk” provided by the Federation of European Risk Management Associations:
https://www.ferma.eu/app/uploads/2011/11/a-risk-management-standard-english-version.pdf
Read the following article to find out about factors that could create a risk at your business:
Step 2. Get inspired
Negativity and stress can only affect your journey in a negative way. Motivate yourself not to be afraid of taking risks.
Watch this TedTalk by Daniel Delgado about Taking Risks:
Watch this short video on Elon Musk’s story:
Write down one innovative aspect of your business idea and compare it with your team. This will help you reinforce confidence in your entrepreneurial journey.
Step 3. Define your objectives Your objectives are directly connected with the idea of risk. Hold a brainstorming meeting with your team and write down the goals you want to succeed, on the long term to short term. This list of objectives should include short as well as long term goals, financial goals, strategic goals, goals on quality and knowledge and others. Write SMART goals: Simple, Measurable, Attainable, Relevant, and Time-bound.
Step 4. Prepare a SWOT Analysis for your idea
A SWOT Analysis is a technique which can be used within a group or by someone to self-assess their idea, business, or project. By applying the SWAT Analysis, you will map the Strengths, Weaknesses, Opportunities, and Threats for your business. This mapping will help you prepare the improve the weaknesses and face the threats in order to minimise the overall risk.
Enter the link below and download a SWOT Template for PowerPoint for free:
https://slidehunter.com/powerpoint-templates/swot-analysis-powerpoint-template
Choose a slide of your preference and start listing the Strengths, Weaknesses, Opportunities, and Threats of your enterprise in each box.
Check out this article about SWOT Analysis by Alice Corner:
Step 5: List the risks
Risk can be driven both internally and externally and can be financial, hazard, operational, strategic etc. Hold a brainstorming meeting with your team. Together, based on your findings so far, list all factors that might affect your enterprise based on these categories.
Create a table for each risk based on your earlier findings. Add information separately for each risk, which will include its probable impact on your strategy, financing and/or operations of your project. Then compare the risks and sort them by the most serious for your enterprise.
EVALUATION
| Knowledge | Skills | Attitudes |
|---|---|---|
| • Basic Definition of what Risk is | • Describe what risk is | • motivation to face risks and challenges |
| • Understand the importance of risk management | • Set short and long-term objectives for an enterprise | • Inspiration to face risks and challenges |
| • Basic know-how on how to set short and long-term SMART goals | • Prepare a SWOT Analysis | • Cultivating a problem-solving approach in young entrepreneurs |
| • Knowledge of how to conduct a SWOT analysis | • Map the risks | |
| • Basic knowledge of how to map risks | • Skills to cope with uncertainty and ambiguity | |
| • Basic Skills to calculate risks |
As part of the assessment, the learners are expected to complete the exercises in steps 2- writing the innovative things of their idea, 3 – Defining their objectives, 4- Preparing a SWOT Analysis, and 5 – Defining the risks of their start-up.
Additionally, users will need to answer to the following evaluation questionnaire: https://forms.gle/CNs2UHfchiRA3yqv8
Q1: What is risk?
1. the probability of a company to file for bankruptcy
2. the combination of the probability of an event and its consequences.
3. a situation involving exposure to danger
Correct Answer: 2
Q2: Confidence is the most important factor to dealing with risks. Is this sentence correct?
1. Yes
2. No
Correct Answer: 2
Q3: Risk can be driven both internally and externally. Is this sentence correct?
1. Yes
2. No
Correct Answer: 1
Q4: What does SWOT stands for?
1. Search for Weaknesses, Objectives and Threats
2. Strengths, Weaknesses, Objectives and Threats
3. Success, Win, Outstanding, and Terrific
4. Strengths, Weaknesses, Opportunities, and Threats
Correct Answer: 4
Q5: All risks have the same importance. Is this sentence correct?
1. Yes
2. No Correct Answer
CONCLUSION
Congratulations, you have reached the end of this WebQuest!
Through this WebQuest we have successfully learned the important steps we need to take that will help us cope with risk, uncertainty, and ambiguity, and to calculate the risk in our start-up. Most importantly, you have succeeded in this WebQuest by working together with your team and exchanging ideas.
You can carry and apply the knowledge you have acquired outside your entrepreneurial life as well. Use the knowledge you have learned to be prepared for risks in your everyday life, set your personal goals and be prepared for future challenges.
“If you always do what you’ve always done, you always get what you’ve always gotten.”
https://destrywitt.net/the-role-of-risk-in-entrepreneurship/
How an entrepreneur deals with uncertainties & risks
INTRODUCTION
What comes to your mind when you first hear the word “entrepreneurship”?
If we asked this question to a young person, we would get some of the following answers: opportunities, creativity, adventures, success, money, business, and much more.
Someone with more experience on entrepreneurship would agree, but would also include words like risk, challenges, uncertainty. And that because entrepreneurs know that the path to success is not strewn with roses. Not only in entrepreneurship and business but in life in general.
In the new opportunities, young entrepreneurs pursue to expand their horizons. Risks, challenges, uncertainties and the fear of failure are common phenomena. Coping with and overcoming risks is often not easy. Young entrepreneurs need to come up with strategies to detect these risks early on time, analyse and evaluate them, prioritise them based on their importance and the threat they carry and take actions against them. With a problem-solving mindset, most of these challenges can be overcome, and a thriving entrepreneurial journey can be secured!
TASKS
The goal of this WebQuest is to help you to deal with uncertainties and risks and to mitigate them. As a young entrepreneur, you will go through different steps that will help you manage risks and make decisions on those risks.
You launched your company a few months ago in Paris in computer security, including software development and IT services. You have some existing products in the market, which are competing with other brands at an international level.
You are currently in the process of launching a new product which aims to support Small and medium-sized enterprises (SMEs) store and protect their data online. You have already announced the launch of a new product, and you are only three months away from the launching day. Also, you have clients who have prepaid to start using the product from day one of its launches. Based on the market research you have made, launching this product on time will bring in the company approximately 250 thousand euros in the first two years.
Your development team has informed you that there are security bugs needed to be fixed regarding the protection of data. If these bugs do not get fixed, data leakage might take place. These security bugs might affect the release time of the product.
As the head of the enterprise, you must decide what the next steps with this are. You have the following options:
- Announce a delay to the release of the product. This will give you to improve the security bugs, and at the same time, it will provide you with more time to make improvements to the whole product before releasing it. At the same time, this might drive some clients to other alternatives or make clients who have prepaid to ask for a refund. This is expected to lower your estimations of the two-year profit by 50 thousand euros.
- Raise the initial budget to help finalise the product on time. This will give the development team the possibility to make all necessary fixes on time before the product’s release. You are unsure of this option because you will need to spend an additional 10 thousand euros on personnel and other costs.
- Launch the product on time and let the development team update after. This option has the benefit of spending no extra money or postponing the date. On the other hand, the possibility of a data leak might harm your brand image and lead to legal actions against your company that could threaten the viability of it.
Your task is to identify the risks your company is facing, analyse them and make decisions for the benefit of your enterprise. You will need to carefully think of your options and rule out those who are unacceptable.
PROCESS
Step 1. Describe the risks
With your team, provide a clear description of all risks in your enterprise based on the information provided to you. Take a paper or open a new Word document and write down all the risks. Give a name to each risk and their cause and effect (or impact) on your goals. Use words like IF, BECAUSE and/or MIGHT. This exercise is essential to map the risks to your enterprise or project.
Watch the following video to understand better how to describe the risk:
To better understand the terms Risk, Cause, and Effect, read the following article:
https://www.isaca.org/resources/isaca-journal/past-issues/2014/writing-good-risk-statements#2
Step 2. Quantify and Prioritise your risks
A pivotal step to risk management is prioritising your risks. To do that you have to make the risks measurable and comparable. When prioritising your risks, will need to take in mind and measure information like the size of the risks, meaning how much impact it could have to your organisation, and the proximity of the risk, having to do with the urgency of the need to act.
To measure and prioritise the size and impact of all your risks, you can fill a Risk Assessment Matrix. This exercise combines the severity and likelihood of a risk.
To do this exercise, download and open the Risk Assessment Template in the link below:
https://www.teamgantt.com/risk-assessment-matrix-and-risk-management-tips
The Template has the form of an Excel document with three tabs: Risk Assessment Matrix, Risk Assessment List, and Lists.
On the second tab of the Excel document, you will find a table of six columns: RISK, AREAS AFFECTED, SEVERITY, LIKELIHOOD, RISK IMPACT, and RECOMMENDED ACTION(S).
On the first column, write down the risks you have identified by name and on the second write down the areas affected. The next three columns have dropdown options. Make a choice on likelihood and risk impact based on the level of each risk.
Once you have completed this step, go back to the first tab of the document titled “Risk Assessment Matrix” and find its position on the graph.
Repeat this exercise for all the risks you have identified. After you finish, prioritise the risks based on their impact.
Step 3. Write down your options to encounter the risk
Congratulations, you have successfully defined the risks of your enterprise and you have managed to prioritise them. Now we must prepare a response regarding the risk with the New product’s security bugs.
To do so, create an Event Tree diagram. On this diagram, you will list the possible responses to the identified risk.
Find out how to create an Event Tree diagram in the link below:
https://www.edrawsoft.com/create-event-tree.html Put on the Event Tree diagram all the possible responses to the risk. For each of the options, including the possible outcomes of them. Is there an option whose threat is so significant that you would rule it out?
Step 4. Cost-Benefit Analysis and decision
You have successfully mapped your options to respond to the New product’s security bugs risk, and you have ruled out the possibilities you consider unacceptable. To choose your final response to that risk, you need to prepare a Cost-Benefit Analysis. This analysis will help you make the most profitable choice for your organisation.
To find out what a Cost-Benefit Analysis, check the links below:
https://dictionary.cambridge.org/dictionary/english/cost-benefit-analysis
https://www.investopedia.com/terms/c/cost-benefitanalysis.asp
With the information given to you, compare the costs and benefits of the options to encounter the New product’s security bugs risk and take a decision on the response on behalf of your organisation. Compare your decision with other members of your team. Do you all agree? Support your choice by explaining you selected this option.
EVALUATION
| Knowledge | Skills | Attitude |
|---|---|---|
| • Knowledge of what uncertainty, ambiguity and risk are. | • Create plans and strategies to manage risk. | • Awareness of how to evaluate risks before acting. |
| • Understanding of the importance of risk management. | • Evaluate the risks of establishing a digital business. | • Awareness of how to take risks while mitigating unforeseen outcomes. |
| • Factual knowledge about what factors make a risk worthwhile. | • Prioritising risks | • Problem solving mindset. |
| • Knowledge of risk management approaches. | • Evaluate the benefits and risks of alternative options before taking a decision. | • Responsible Leadership characteristics. |
| • Understanding the role information plays in reducing uncertainty, ambiguity, and risk | • Debate the arguments for and against taking a risk. | |
| • Being able to tell the difference between acceptable and unacceptable risk | • Evaluate a cost-benefit analysis regarding taking a risk. | |
| • Weighing up risks and making decisions despite uncertainty and ambiguity. |
As part of the assessment, the learners are expected to complete the exercises in all steps.
Complete the following short quiz: https://forms.gle/dsLXK49Fq752nbpL8
Q1: We conduct the description of the risk to:
1. Prioritise risks of the enterprise
2. Map the risks of the enterprise
3. Evaluate the risks of the enterprise
4. Map the needs of the enterprise
Correct Answer: 2
Q2: We prioritise risks based on their size and proximity.
1. True
2. False
Correct Answer: 1
Q3: We have used the Risk Assessment Template to:
1. Quantify risks
2. Map the risks
3. Map risk response the options
4. Evaluation risk response options
Correct Answer: 1
Q4: The Cost-Benefit Analysis is a process that helps us map risks:
1. True
2. False
Correct Answer: 2
Q5: The Cost-Benefit Analysis is a process businesses use to analyse decisions.
1. True
2. False
Correct Answer: 2
Questions that a trainer might use in a whole-class discussion to debrief this WebQuest:
What did you learn through this WebQuest?What are the things that you have learned that could be applied in your everyday life?
CONCLUSION
Congratulations, you have reached the end of this WebQuest!
In this WebQuest, you have successfully managed the risks of a new enterprise. In the beginning, together with your team you identified the current threats the company is facing. This is a process enterprises continuously go through to become aware of potential risks. After, you analysed the risks to make them comparable and to prioritise them, before taking preventive measures against them. Companies do the same, in a much more analytical way, for the same purpose.
Additionally, you had the opportunity to work on the response to a specific risk of the scenario you were given. Steps 3 and 4 aimed to demonstrate a simple way to put down ideas and options to encounter a risk. Besides, when responding to risk, businesspeople and entrepreneurs use similar processes when investing in new areas, although they include more complex systems and more data and information.
Congratulations, you have reached the end of this WebQuest! You are now equipped with the knowledge to cope and overcome risks, by managing them methodically to shield your ideas. With a problem-solving attitude and a leader’s mindset, a successful entrepreneurial journey is guaranteed.
“It does not do to leave a live dragon out of your calculations, if you live near him” – J.R.R. Tolkien
