T4 risk taking & resourcing skills-2013
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The document discusses various topics related to risk-taking and resourcing skills among entrepreneurs. It provides quotes from entrepreneurs about their characteristics and behaviors, such as being independent, persistent, and good listeners. It also discusses concepts like risk versus uncertainty, different types of risks entrepreneurs face, and approaches to risk management. Additionally, it covers types of resources entrepreneurs need, such as financial, technological and human resources, as well as factors to consider in resource management.
T4 risk taking & resourcing skills-2013
- 1. Risk-Taking & Resourcing Skills Mohd Rafi/Ghazali Ahmad, Ph.D ©2009/10
- 2. Entrepreneurs say they: Often started with a big company, then quit Are lone rangers, independent Are persist, persevering, disciplined Are confident, self-reliant Have a broad education, are generalists Have basic business skills Started young Are good listeners Engage in calculated risk-taking
- 3. Entrepreneurs say they: Are opportunity-driven Know how to assess opportunities Have, or quickly learned, team-building skills Have strong technical skills Appreciate mentorship Are able to manage growth Understand the importance of social interaction and common sense Play “not to lose” Are frequently serial entrepreneurs
- 5. Some Quotes "He who is not courageous enough to take risks will accomplish nothing in life." - Muhammad Ali "Our lives improve only when we take chances -- and the first and most difficult risk we can take is to be honest with ourselves." Walter Anderson "It is easy to be brave when far away from danger." - Aesop "If you don't fail now and again, it's a sign you're playing it safe. " Woody Allen “Risk is just like shadow. It follows you wherever you go, so what. Forget about it and focus on what you are doing. Remember, no pain, no gain; no risk, no return - Dell APT 2013 © 2009 Dr. Rafi/Dr. Ghazali 5
- 6. Risk – The root of the word (morphology) Rizq (Arabic) Risicum (Latin) Risque (French) Risk (English) APT 2013 © 2009 Dr. Rafi/Dr. Ghazali 6
- 7. Risk – Is it good or bad? Good because: – – – It provides opportunity It provides return from ‘investment’ It helps us to be meticulous, alert and always mindful when making decisions Bad because: – – – It is unpredictable Leads to stress and anxiety Chance of losing money APT 2013 © 2009 Dr. Rafi/Dr. Ghazali 7
- 8. Concept of risk Risk is a concept that denotes a potential negative impact to an asset or some characteristic of value that may arise from some present process or future event. In everyday usage, risk is often used synonymously with the probability of a known loss. Paradoxically, a probable loss can be uncertain and relative in an individual event while having a certainty in the aggregate of multiple events. APT 2013 © 2009 Dr. Rafi/Dr. Ghazali 8
- 9. Risk vs. Uncertainty: Some Definitions Webster's Dictionary: – risk: "possibility of loss or injury; peril" – uncertainty: "indefinite, indeterminate" and "not known beyond a doubt." Frank H. Knight (1921): – risk is present when future events occur with measurable probability – uncertainty is present when the likelihood of future events is indefinite or incalculable APT 2013 © 2009 Dr. Rafi/Dr. Ghazali 9
- 10. Risk vs. Uncertainty: Some Definitions (Risk) Risk is the possibility of suffering harm or loss; danger. Risk could be a factor, thing, element, or course involving uncertain danger; a hazard. Risk involves the expectation of loss. It is a function of the probability and the consequences of harm. Risk is the possibility that returns from an investment will be greater or less than forecast. A state of uncertainty where some possible outcomes have an undesired effect or significant loss. APT 2013 © 2009 Dr. Rafi/Dr. Ghazali 10
- 11. Risk vs. Uncertainty: Some Definitions (Uncertainty) Uncertainty is the condition of being uncertain; doubt. The lack of certainty, a state of having limited knowledge where it is impossible to exactly describe existing state or future outcome, more than one possible outcome. The state of mind of an individual who is unable to make any estimate of future events. State of knowledge in which one or more alternatives result in a set of possible specific outcomes, but where the probabilities of the outcomes are neither known nor meaningful. APT 2013 © 2009 Dr. Rafi/Dr. Ghazali 11
- 12. Distinction between risk and uncertainty Frank Knight (1921) established the important distinction between risk and uncertainty as follows: "Uncertainty must be taken in a sense radically distinct from the familiar notion of risk, from which it has never been properly separated.... The essential fact is that 'risk' means in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of this character; and there are far-reaching and crucial differences in the bearings of the phenomena depending on which of the two is really present and operating.... It will appear that a measurable uncertainty, or 'risk' proper, as we shall use the term, is so far different from an unmeasurable one that it is not in effect an uncertainty at all." APT 2013 © 2009 Dr. Rafi/Dr. Ghazali 12
- 13. Risk – Decision Making Some points: Only risk-takers are truly free. All decisions of consequence involve risk. There is no such thing as permanent security. You are supposed to be afraid when you risk. Risking normally involves a degree of separation anxiety, the anxiety you feel when you are removed from something that makes you feel secure. Tackling risk in decision-making Decide whether the risk is necessary or desirable. Risk for the right reasons and when you are calm and thoughtful. Don’t take a risk when you are emotional. Have a goal. Have clear purposes in mind. Determine the possible loss as well as the gain – know exactly what the consequences of failure will be. Make an accurate estimate about the probability of each case. • When possible, take one risk at a time.
- 14. WISER DECISION MAKING Here are eleven (11) basic steps to make wiser decisions. Define, as specifically as you can, the decision that needs to be made. Write down as many alternatives as you can think of. Let your imagination run free. See where more information about possible alternatives can be found. Check out your alternatives. Find out more about the specifics of each option. Sort through all the alternatives. Evaluate them to see which one/s work best for you. Visualize the outcome of each alternative. Do a reality check. Cross out those that are least likely to work. Which alternative “fits” best? Review the remaining ones and decide which of them are most comfortable. Get started! Get moving once you have made your decision. Be sure to review your decision at specified points along the road. Remember that you can always change your mind.
- 15. Characteristics of risk and uncertainty Risk – – – – – – Measurable uncertainty Quantifiable Deliberate Insurable (most of it) Objective Priori or statistical probability (objective probability) APT 2013 Uncertainty © 2009 Dr. Rafi/Dr. Ghazali – Unmeasurable uncertainty – Unquantifiable – Non deliberate – Non insurable – Subjective – Non-symmetrical or non-homogenous probability (subjective probability) 15
- 16. Entrepreneurial risks Financial risks Business and Operational risks Product and Service liability Career risks Family and Social risks Psychic and Health risks Political and Governmental risks Unpredictable and Uncontrollable risks APT 2013 © 2009 Dr. Rafi/Dr. Ghazali 16
- 17. Typology of entrepreneurial risk styles Level of personal financial risk High Level of profit motive Low Low High Risk avoiding Activity seeking Risk accepting Activity seeking Risk avoiding Profit seeking Risk accepting Profit seeking Source: Monroy & Folger (1993) APT 2013 © 2009 Dr. Rafi/Dr. Ghazali 17
- 18. Risk management Risk management is the process of identifying risks in advance, assessing their likely occurrence, and taking steps to reduce or eliminate them (mitigation) APT 2013 © 2009 Dr. Rafi/Dr. Ghazali 18
- 19. Risk management Risk management involves identifying, analyzing, and taking steps to reduce or eliminate the exposures to loss faced by an organization. The practice of risk management utilizes many tools and techniques, including insurance, to manage a wide variety of risks. Every business encounters risks, some of which are predictable and under management's control, and others which are unpredictable and uncontrollable. APT 2013 © 2009 Dr. Rafi/Dr. Ghazali 19
- 20. Risk management in small business Risk management is particularly vital for small businesses, since some common types of losses—such as theft, fire, flood, legal liability, injury, or disability—can destroy in a few minutes what may have taken an entrepreneur years to build. Such losses and liabilities can affect dayto-day operations, reduce profits, and cause financial hardship severe enough to cripple or bankrupt a small business. APT 2013 © 2009 Dr. Rafi/Dr. Ghazali 20
- 21. Entrepreneurs’ risk taking behavior Risk taking is a skill need to be learned Do not fear to take calculated or moderate risks Do not take risks unnecessarily Perceive risk as opportunity rather than as threat Perceive risk as challenge that triggers them to behave entrepreneurially APT 2013 © 2009 Dr. Rafi/Dr. Ghazali 21
- 23. Types of Resources Manpower Material Financial(Money) Technological(Machine) Business Premise/Physical Information Reputation Networks Organizational resources – structure, systems and business models APT 2013 © 2009 Dr. Rafi/Dr. Ghazali 23
- 24. Strategic vs. Common Resources Strategic resources refer to resources which provide a sustained competitive advantage to a firm Common resources are necessary for carrying out the firm’s usual activities but provide no specific advantage APT 2013 © 2009 Dr. Rafi/Dr. Ghazali 24
- 25. Attributes of Strategic Resources Valuable Rare Non-substitutable Hard to copy APT 2013 © 2009 Dr. Rafi/Dr. Ghazali 25
- 26. Key Factors to Consider Essentiality (critical or noncritical) Availability of supply Cost Strategic/competitive advantage Statutory/Legal requirements Quality vs. quantity APT 2013 © 2009 Dr. Rafi/Dr. Ghazali 26
- 27. Resource Management Objectives: – To ensure any resources needed by the business is available at the time, quantity and specification (optimality) eg. Just in Time (JIT) – To avoid unnecessary waste or purchase of resources eg. Material Requirement Planning – To ensure smooth operation of the business APT 2013 © 2009 Dr. Rafi/Dr. Ghazali 27
- 28. Creativity and Innovation in Resource Management Creative and innovative in acquiring resources – Cheap, reusable, multipurpose, recyclable Creative and innovative in managing resources – Efficient, reduce waste, generate revenue APT 2013 © 2009 Dr. Rafi/Dr. Ghazali 28