1.1b - Risk And Reward

Question 1

How can a business minimise risks ?

Answer 1

• market research

- revenue forecasts

Question 2

What are the main risks that an entrepreneur takes when they start up a business ?

Answer 2

• business failure
• financial loss
• lack of security

Question 3

Explain one reason why a business might fail

Answer 3

• problems with it’s cashflow ( customers are slow paying their bills )
• unexpected costs such as trying to replace an employee
• this means a business doesn’t have enough money to buy essential supplies or pay employees wages
• lead to business burrowing money

Question 4

What causes a business to fail other than Cashflow ?

Answer 4

• unexpected drops in sales revenue ( running out of raw materials ) :-
• can occur due to recession : eg. drop in sales revenue of luxury goods
• behaviour of suppliers : closure of local tile factory
• competition : local shop could suffer if competitors lower price

Question 5

What are the different types of risk that can lead to financial loss ?

Answer 5

• competitive risks : competitor might do better , spend more on marketing etc.
• technical risks : product or risk might not work as intended
• financials risks : business doesn’t have the right amount of investment

Question 6

What are the advantages/disadvantages when starting your own business ?

Answer 6

• does not have security for working for someone else ( irregular wage , no sick pay or pension etc )
• gives opportunity to develop their own ideas and control own future without working under a set of rules/restricted ( independence )
• financial security such as using own savings to start up a business
• can affect health , under pressure / stress

Question 7

Explain one reward of starting a business

Answer 7

• they make profit when a business succeeds after going through many risks which gives Entrepreneurs satisfaction
• can get industry awards
• enjoy providing a service to customers that they really love