Calculating risk in business...

I know that some people are inherent risk takers and others are much more risk averse. Personally I place myself in the latter category, including when looking at business opportunities.

I am interested how people go about calculating risk in business and what sort of factors influence risk, so I thought the business brainstorm would be the place to post All thoughts appreciated!

Stephen

Re : Calculating risk in business

For one of the new ventures which I recently started which involved a lot of risk taking, we decided to go ahead based on the following factors:
-identify the right people to work with
-research the market well to understand the size
-decide how much money you are prepared to risk to invest
-how many prospect clients are in the pipeline from a sales perspective
-competition
-how innovative is your business
-time you can dedicate to your business

At the end of the day, risk taking is aligned to how much you trust your business idea is a good idea?

I hope this helps.
Ingrid

Re : Calculating risk in business

I think if you try to take on a lot of risk in one aspect of your business you should perhaps try to level that out by taking little risk elsewhere.

For instance if you take a lot of risk on selling a product you are unfamiliar with and know little about, don't also take a big risk in buying a massive volume and getting yourself in financial debt - just buy a few units to see if you can sell them first.

Lianne

Re : Calculating risk in business

Generally use a scoring system... the most basic is a score of 1-3 on the chance of the risk happening and a second score of 1-3 on the impact if the risk materialised.

A more complicated scoring system will split things down to a greater level of detail (eg is it a legal, regulatory, contractual or reputational risk etc)

Re : Calculating risk in business

There are all sorts of matrix that you can use to assess and rate risk, many books have been written on this topic and loads of literature abound on the internet.

Don't underestimate the gut feel too however - obviously do all the analysis necessary but if there is a niggling doubt or a niggling thought that something will / won't work, remember to listen to that voice inside you too!

Tim

Re : Calculating risk in business

The biggest calculation of all is the one that tells you what your net cashflow would be in the event that in the alloted period of time for the project it turns out to be badly off-target. No matter how well thought out the marketing plan, to ignore this is like trying to cross a busy road with your eyes shut.

Joe
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