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LECTURE 4 : ENTREPRENEURS AND RISKS

LECTURE 4 : ENTREPRENEURS AND RISKS. Objektives : To Understand ·       - risks ·       - Relationship between risks and business decision ·       - Types of business and financial risks ·       - Why entrepreneurs need to undertake risks? ·

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LECTURE 4 : ENTREPRENEURS AND RISKS

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  1. LECTURE 4 : ENTREPRENEURS AND RISKS Objektives : To Understand ·      - risks ·      - Relationship between risks and business decision ·      - Types of business and financial risks ·      - Why entrepreneurs need to undertake risks? · - Types of risks that can be undertaken by entrepreneurs ·     - Risk analysis

  2. 1. The origination of word “risk” Ø“risq” (Arab) – anything that have been awarded by Allah S.W.T to human beings that we can obtain profit from them. • Ø“risicum – a barrier faced by sailors across the reef – related to situation that is not favourable. • ØScientificically – involved in estimating opportunities, the size of possible outcome(s) that we will gain if we were to undertake such risk or both. • ·Risk – The possibility that a situation may end with a negative or positive outcome for the firm. keadaan hasil

  3. 2. Definition of Risk • Potrays the element of uncertain. • When entrepreneurs make their business decisions – the outcome(s) is/are uncertain, hence should conduct analysis before undertaking such risk(s). • Risky situation involved either successful or failure – not guaranteed.

  4. 3. Relationship between business decision and risk • Due to uncertainties – entrepreneurs should seek for information in order to estimate the possible outcome(s) • - Entrepreneurs should take calculated risks – to minimize the the negative outcome(s). • -Factors considered: • 1. Degree of uncertainty • 2. Value of information

  5. 4. Types risk involved in business: • A. Business Risk • i.Risk that could be transferred to another person. • ii.Risk that could be controlled • iii.Risk that cannot be controlled • B. Financial Risk •   i.    Cash flow level •   ii.   Loan • iii.    Credit • iv.    Foreign Currency Exchange

  6. 5. Risk Management • ØMinimize / reduce the risk • Examples: • a.             Using fireproof materials • b.             Store inventories in separate warehouses. • c.             Install security alarm • d.             Install circuit camera • Ø  Types of risk that can be undertaken – only those which will give positive outcome(s). • Ø  Take calculated risks. • Ø  Can use computer databases – assessing their likely possibility outcomes to be selected. • Ø  Try to maximize the profits and minimize the costs.

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