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Entrepreneurial risk

Entrepreneurial activity presupposes the possibility of risks of a different nature. This is due to the fact that the market reality is constantly changing, and its future is estimated as uncertain. Therefore, one can not be 100% sure that the expected results will be achieved. Every businessman, especially a novice, must take into account possible situations that may arise in the face of economic uncertainty. All this is what business risk is.

The market is an economic freedom. But with the freedom of one entrepreneur, the freedom of the other is next to each other, and for it one must pay something. In this case, entrepreneurial risk is payment. One businessman is free to buy or not buy one or another product at the prices that the seller sets, or at a price that he himself will impose upon bargaining. Everyone in economic relations strives solely for his own profit, and in some cases profit for one means a loss for another. As for competitors, they are even interested in ousting each other from the market in general.

These circumstances increase the likelihood of unforeseen events, which as a consequence result in entrepreneurial risk. You can not exclude the influence of the external environment. It implies social, economic and political characteristics and changes, which can not be ignored. The presence of risky situations does not mean at all that it is necessary to leave the market. It is necessary to further develop and analyze possible methods for reducing risks, and also successfully apply them.

The history of entrepreneurship development in countries with a market economy is rich in examples of rapid ups and downs, successes and failures. Therefore, in such tough conditions it is necessary to learn the rules of behavior in the market, given the uncertainty and unforeseen situations. In the broad sense of the word, risk is a danger or a possible threat of loss or loss.

Entrepreneurial risk is specified in concrete terms to characterize economic activity and is defined as the one that is possible in the sphere of production and sale of goods and services accompanying commodity and money transactions, as well as investment projects. It can manifest itself in a partial or complete loss of either resources or money as investments or profits.

Manifestations of risk are diverse. These can be fires, natural disasters, interethnic conflicts, wars, changes in the legislation of regions and countries, as well as crises and jumps in inflation. Depending on the cause of the occurrence, different types of risk are identified.

The study of risks and their manifestations allows the development of measures to reduce them, which are aimed at reducing the likelihood of their occurrence, as well as reducing losses. The most common are the following: insurance, diversification, hedging.

  • Insurance can compensate for the consequences. Risks vary depending on the sphere of entrepreneurial activity, so different types of insurance are applied, including personal (if necessary) for employees of the organization. Separately considered insurance of banking or financial, as well as risks from foreign trade activities.
  • Diversification presupposes the division of capital and its subsequent distribution into various objects that are not related to each other.
  • Hedging involves insurance by moving from one person to another risk associated with a future price change.

The existence, development and change of risks led to the fact that management of them became a separate professional sector, in which qualified insurance specialists and financial managers work. Therefore, we can note the positive side of this phenomenon, which provides additional opportunities for the realization of man in the labor sphere.

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