Be a Calculated Risk Taker
The difference between a Layman and an Entrepreneur is the ability to take risks.
A Smart Risk-Taker: Ajit Balakrishnan
Ajit Balakrishnan is known to be a man of indomitable spirit with an extraordinary ability of entrepreneurial risk-taking. His strong belief in the potential of web space in the world of media and communication, after his successful advertising agency business Rediffusion, led him to launch Rediff.com. It was his way of doing “different things” differently. Web space and portal business was a dark territory at the time, when the Internet services were barely launched in India. His extraordinary vision led him to success and prosperity, sooner than expected. After the completion of his MBA at IIM Kolkata, he preferred to launch his advertising business, whereas most of his colleagues joined Hindustan Lever and L&T, the companies which were considered to be a place for exceptional business leaders at the time. It was not only unthinkable, but also a rebellious step. He did a similar thing by launching Rediff.com later on in1996, when very few people in India actually knew about Internet. There was a huge risk of failure, but he successfully did it and created a history. Ajit Balakrishnan, the founder of Rediff.com, has an unusual success story. He has no western connection and no Silicon Valley background. He also does not have any resemblance to the likes of Larry Ellison, Steve Jobs or Bill Gates. He is not known for wearing jeans or asking employees to come to office in shorts and take home as much as they contribute towards profits. He did not start his business in the 80s and was not a computer geek. Yet, he was able to create a huge empire of $220 million (according to NASDAQ value of Rediff) through his ecommerce and social media site Rediff.com. Rediffmail.com is quite popular in India and despite international competition from Gmail, Yahoo mail and hotmail.com, around one third of web surfers in India use Rediffmail at least once a day. Many Internet leaders such as Google and Yahoo are eyeing for Rediff, as far as takeover and merger plans are concerned.
It is usual for a layman to relate the term ‘entrepreneurship’ to risks. Risk-taking is an integral part of entrepreneurial life. Business owners must know when to seek loans, when to expand, when to risk a steady salary in favor of self-employment and how to judge the potential benefits of taking a risk. Entrepreneurs have to have a risk-taking spirit, because not taking risks can kill a business before it gets off the ground. But they have to balance that impulse; excessive risk-taking can destroy a business and its owner’s credit, finances and personal life. In any business planning, entrepreneurs should take all the necessary risks to achieve the highest possible returns, but if the risks are not calculated, it becomes a recipe for failure.
For any start-up business, spelling success often turns out to be a seemingly impossible feat to accomplish. Every business involves risk, as it is a notion related to achieving the returns you have anticipated. This is where calculated risk-taking comes into the picture as it is the magical ingredient to concoct the perfect recipe of entrepreneurial success.
Risk-taking is inevitable, especially in the context of entrepreneurship. Therefore, it is essential to specify that calculated risk-taking is the key that will ultimately bring about the accomplishment of goals.
The question is what actually does calculated risk-taking imply? To be precise, it annotates a state of being well prepared in case of failure. A fool-proof plan, no matter how promising it may seem, does not exist. It is for such trying situations that it is imperative to have backup plans that significantly remedy the pain or setbacks that will be incurred as a result of the failure. Being in a state of preparation helps an entrepreneur get better grip of the situation encouraging him to handle it effortlessly. Business planning does not mean having a plan that you are hoping will work. It is about preparing, taking and expecting the business to face any challenges that may come about.
As they say ‘expect the unexpected’. A well-thought out plan is one where you not only keep an eye on the gains but are also aware of the chances of failure eclipsed by the promising nature of prospects. This way failure does not catch the entrepreneur completely off-guard who is still in the process of gaining his footing. This allows an individual to realize his true potential, not letting him succumb to the effects of the catastrophe. The point that needs to be established here is that the chances of failure for any start-up business are considerably higher as compared to that of its success. Embracing the mantra can help an entrepreneur stay aloof of the stress when the outcomes are other than those expected.
Calculated risk-taking does not mean that you plan to fail. Instead one should be able to bear the brunt in the event of failure. With a contingency plan up one’s sleeve, an entrepreneur will not be overwhelmed since he has already determined what needs to be done in case of crisis. Calculated risk-taking can also be termed fairly as the sorcerer’s stone for entrepreneurial success. The entrepreneur will be able to keep his focus on the appropriate execution of the business plan as opposed to always having to look behind his back for the fear of failure stabbing him.
Taking risks that are calculated can serve as a life-saving drug for any business. Not only do they prevent an entrepreneur from slowing down, with the assurance that there are survival plans already in place, an entrepreneur can bring out the best in him. This increases one’s chances of success. Calculated risk-taking revolves around the idea that one should hope for the best but prepare for the worst. Entrepreneurship is the art of organizing resources in the best possible manner and by taking calculated risks, helping entrepreneurs explore new realms of business that leads him to all the success desired.
Process of Risk Management
Risk management is a 5 stage process. These processes go simultaneously. These steps are to be followed for having a good risk management. These steps are listed and explained below:-
1- Risk Identification:-
This is the first and the most important step of risk management. One cannot do anything with the risk unless and until that risk has been clearly identified. Risk identification starts from where the problem originates. Risk identification can be objective based, scenario based, taxonomy based and common risk checking.
2- Risk Analysis:-
Risk analysis includes analyzing the risk and measuring its vulnerability or its impact. Frequency and severity of the risk will be analyzed as well. Risk management can be quantitative as well as qualitative. Numerically determining the probabilities of various adverse events and expected extent of losses if any unexpected event occurs is a Quantitative Analysis where as defining the various threats, devising countermeasures and determining the extent of vulnerabilities is referred to as Qualitative Risk Analysis.
3- Risk Control:-
After analyzing the risk then decided that how can the risk be controlled. If the risk can be controlled by in house then well and good, if not then decide on how to transfer that risk. Risk control is the entire process of procedures, systems, policies an organization needs to manage prudently for all the risks which are arising.
4- Risk Transfer:-
If the risk is not manageable and one cannot retain that risk, then we have to transfer that risk to a third party. This is the stage where insurance comes in action. Insurance will be willing to take on those risks which the organization can’t handle.
5- Risk Review:-
Risk review is the last step in which all the above mentioned steps are evaluated. Review must be regular as the conditions and the circumstances of the business and organizations changes continuously. It should be monitored that the desired results of the risk management are being achieved or not and if not then identifying that where the problem occurred and then reviewing all the steps and making the changed in the management according to scenario.The challenge with all risks is that they must be proactive, measured, and managed. If not, they automatically become ba