How to take a risk in a business Essay Example | Topics and Well Written Essays - 1250 words

How to take a risk in a business - Essay Example It is therefore imperative that to launch a business, risk taking must be embraced and this involves getting out of the comfort zone with an intention of triumphing both economically, socially and technically. All businesses in the current competitive world should take charge of their operations by specifying their target and their plans. This piece of writing offers detailed information on how businesses take risks and the risk taking processes. Various kinds of risks that affect most businesses are strategic risk, compliance risk, financial risk, operational risks, and reputational risks. Risk taking is simply opening oneself to change , honest appraisal of a situation, understanding the risks involved in taking action, weighing the pros and cons of taking the action, making a choice to take the required action and performing the action with full consciousness of the potential outcome. it further requires that a risk taker should accept the consequences of the action taken, ignore others approval in order to make the most appropriate risk, pursue the required action without fear of it affecting others negatively and committing to become an objective in pursuing a rational approach to the problem (Mankiw 605-610). It is especially important to pursue risky decisions to avoid some of the possible regretful situations such as lost business opportunities, avoiding something that one is passionate about, lost market share, outdated technology and finally lose of potential management team. The process of taking business risks starts with carefully calculating the risks by thinking about what the potential risk might be. Calculating risks greatly helps in minimizing some of the most dangerous decisions that may lead to the closure of the business. It is important to identify the risk you want to take and this requires massive intelligence and experience. Gather enough information concerning the risk you are just about to take by determining the most risky activities . Maximize on the actions that you know more about and keep away from the actions you know least about. Risk calculation should be aimed at taking an action that will solve long-term problems. Calculating risks involves consideration of how likely is a situation thus involves the probability and the overall cost of taking the risk. Risk exposures which can be used to prioritize risk, risk reduction leverage that calculates the return on investments are some of the formulas used (Mankiw 605-610). Another important step in risk taking process is minimizing the risks as much as possible by gathering enough information on how to do it. Risk minimization may require categorizing of the type of risk such as industrial changes or financial risks and list specific events and sources unique to the possible actions and list the probable consequences in dollar terms. Calculate each item in 1 to 5 point scale and the consequences that may remain completely vulnerable to the risk. After calculat ing all the costs of various risks, prioritize all the risks from the less costly to the more costly. The period predicted resources required such as financial support that is required to implement the project must be carefully calculated. However, the cost benefit analysis should be taken into consideration by considering the possible benefit that may be earned by taking the risk and the anticipated cost of the risk. Only a few of resources should be risked at once in order