Risk Appetite & Resilience: Entrepreneurship and Risk

Entrepreneurs are inherently risk takers.  They are path-makers not path-takers. Unlike a normal, cautious person, an entrepreneur would not think twice about quitting his job (his sole income)  and taking a risk on himself and his idea. 

An entrepreneur is aware that while pursuing his dreams, assumption can be proven wrong and unforeseen events may arise. He known that after dealing with numerous problems, success is still not guaranteed. Entrepreneurship is synonymous with the ability to take risks. This ability, called risk-appetite, is an entrepreurial trait that is partly genetic and partly acquired. 

What is Risk Appetite? 

Risk appetite is defined as the extent to which a company is equipped to take risk, in order to achieve it's objective. Essentially, it refers to the balance, struck by the company, between possible profits and the hazards caused by charges in the environment (economic ecosystem, policies, etc.). Taking on more risk may lead to higher rewards but hav3 a high probability of on good opportunities to grow and reach their objectives. The levels of risk appetite can be broadly categorized as "low","medium" and "high." The company's entrepreneur(s) have to evaluate all potential alternatives and select the option most likely to succeed. Dinosaurs have varying levels of risk appetite for different objectives.  

The levels depend on:

• The type of industry
• Market pressures
• Company objectives

For example, a start-up with a revolutionary concept will have a very high risk appetite. The start-up can afford short term failures before it achieves longer term success.  This type of appetite will not remain constant and will be adjusted DTP account for the present circumstances of the company. 

Risk Appetite Statement 

Companies have to define and articulate their risk appetite in sync with decisions made about their objectives and opportunities. The point of having a risk appetite statement is to have a framework that clearly states the acceptance and management of risk in business. It sets risk taking limits within the company. The risk appetite statement should convey the following:

• The nature of risk the business faces. 
• Which risks the company is comfortable taking on and which risks are unacceptable. 
• The nature of risks of risks the business faces. 
• Which risks the company is comfortable taking on and which risks are unacceptable. 
• How much risk to accept in all risk and reward. 
• Measures of risk and methods of examining and regulating risk exposures. 

Entrepreneurship and Resilience 

Entrepreneurs are characterized by a set of qualities known as resilience. These qualities play  an especially large rile in the early stages of developing an enterprise. Risk resilience is an extremely valuable characteristic as it is believed to protect enterpreneus against the threat of challenges and changes in the business environment. 

What is Entrepreneurial Resilience? 

Resilience is used to describe individuals who have the ability to overcome setbacks related to their life and career aspirations. A resilient person is someone who is capable of easily and quickly recovering from setbacks. For the entrepreneur, resilience is a critical trait. 

• By developing a professional network of coaches and mentors
• By accepting that change is a part of life 
• By viewing obstacles as something that can be overcome 

Characteristics of a Resilient Entrepreneur 

The characteristics required to make an make an entrepreneur resilient enough to go the whole way on their business enterprise are:

• A strong internal sense of control
• Skill to learn from setbacks
• Ability to diversify and expand 
• Cash-flow conscious habitw
• Strong social connections 
• Ability to look at the bigger picture 
• Survivor attitude 
• Attention to detail