Chapter #3 - Opportunities, Risk, Legal And Ethical Considerations

Question 1

What is the defenition of a reward?

Answer 1

Something given in recognition of the effort or return for something achieved.

Question 2

What is the defenition of an opportiunity?

Answer 2

A time or event that makes it possible to do something.

Question 3

What is the defenition fo a risk?

Answer 3

The chance of gaining or losing something as a result of an action taken.

Question 4

What types of factors can create opportunities in an enerprise?

Answer 4

• Changing needs or wants for a product or service
  e.g:
• a change in income
• changes in taste or fashion
• changes in population
• changes in size or structure
• Developments in tech, making new product and services possible and others out-dated
• Changes in the ability to meet needs or wants, for example the failure of competition or access to equipment
• Chanages in government plicies including availbility of grants and subsides or changes in taxation and laws

Question 5

Why is a risk-taking a key cherectaristic for a successfull entrepreneur?

Answer 5

Because without taking a risk you will never learn what could have been. If you make a mistake it is natural and you judt have to learn from it.

Question 6

What are the risks involved with starting up a new enterprise?

Answer 6

• It is not certain a profit will be made
• Choosing wrong pricing or promoting strategy can result in loss of customers
• Having to many unexpected custumers can result in not having enough recourses and angery customers.

Question 7

What are the types of risks you must manage?

Answer 7

• Financial risks
• Economic risks
• Health, safety and enviornmental risks
• Human recource risks
• Production risks

Question 8

What are some examples of financial risks?

Answer 8

Having access to suffivient finance or what to do about unexpected costs.

Question 9

What are some examples of economic risks?

Answer 9

What to do about changes in income, customer tastes or interests.

Question 10

What are some examples of health, safety and enviornmental risks?

Answer 10

How laws and regulations affect what or how you operate.

Question 11

What are some examples of human resource risks?

Answer 11

Having the right skills and number of people in the enterprise.

Question 12

What re some examples of production risks?

Answer 12

access to the right materials, or what to do if a machine breaks down.

Question 13

Why is it important to know what risks you have to manage?

Answer 13

To cplan properly, using the information to make decisions about what action to take (or not) about each risk. This means the enterprise has a better chance of achieving its objectives.

Question 14

What are the stages of risk management?

Answer 14

1. Identify the risks
2. Analyse the implications of each risk
3. Is the risk worth takin?
   NO => Stop the project
   YES =>
4. PLan how to manage the risk
5. Monitor and review

Question 15

What is a PEST analysis?

Answer 15

It identifies important external factors that could have an impact on the enterprise. These are factors that affect the whole market and the enterprise has no control over them.

Question 16

What are external factors to inciude in a PEST analysis?

Answer 16

• Economic factors
• Law factors
• Social factors
• Technological factors
• Health factors
• Law factors
• Fashion chnages
• Trend changes
• Population
• The media

Question 17

What is a SWOT analysis?

Answer 17

It identifies current internal streangths and weaknesses and potential external opportunities and threats for a project.

Question 18

What are internal factors to include in a SWOT analysist?

Answer 18

• Products
• Prices
• Costs
• Profit
• Performance
• Quality
• People
• Skills
• Reputation
• Process

Question 19

What should you do in step 2 of risk management?

Answer 19

Analyse the implications of each risk:
1. What are the chances of it happening?
2. What are the potential concequences of the project if it did happen.
Note: Each risk and its concequences can have positive or negative effects.

Question 20

What should you do in step 1 of risk management?

Answer 20

Identify the risk: Conduct a PEST and SWOT analysis

Question 21

What should you do in step 3 of risk management?

Answer 21

Decide weather the risk is worth it:
* unique to the entrepreneur
* influenced by their attitude towards risk
* using information found in step 2 a decision is made on if the risk is worth taking
* The entrepreneur could decide the risk(s) are too high and the project(s) should be stopped

Question 22

What should you do in step 4 of risk management?

Answer 22

Plan to manage risk
Strategies to do this include:
* Mitigate: Try to reduce the risk by changing what to do.
* Accept: If there is nothing you can do about a given risk, be prepared or set aside money in the budget for any negative effects of the risk happening.
* Transfer: Let someone else take the risk. For example, pass respnsibility for key tasks to someone outside the organization so they manage it.
* Eliminate: …the hazard (don’t do it). Remember that if you try to avoid a risk, you may also have to give up the posotive opportunity.

Question 23

What are ways to reduce risk?

Answer 23

• Detailed research including market research, use of financial projections and cash flow forecasts, use of PEST and SWOT analysis.
• Asking for advice from formal and informal sources of help and support.
• Careful planning by making business or action plan.
• Selling the risk (diversification) by selling different products or selling to different markets.

Question 24

What should you do in step 5 of risk management?

Answer 24

Monitoring risk:
As risks and opportunities change over time, it is impotant to monitor, reviw and reasses the risks and actions taken to carry out your enetrprise.

Question 25

What are the 3 attitudes to risk?

Answer 25

1. Risk-averse: someone who will attempt to avoid any possibility of risk.
2. Risk-keen: someone who is willing to accept a level of risk.
3. Risk-reducer: someone who will attmpet to the liklihood and amount of possible risk.