RISK TAKING ABILITY

Risk is the qualitative result of how obvious and fatal the consequences of an action or event accepted at a particular level can be.

The word risk always carries the identity of the negative consequences of the event. Two risk factors -

1. Explicit material - How evident is the amount of risk?

2. Consequences - What could be the consequences of the risk?

An entrepreneur may face the following risks while conducting business -

1. Market Risk

These risks become apparent when the demand for manufactured goods or services continues to decline and the consequences are dire. The demand for ready made garments in the Indian market continues to grow. Many people now buy ready made garments, such as shirts and pants, from ready made garments stores. 

As a result, the market demand for tailors is steadily declining. The risk of tailoring business continues to grow. As a result, it is easy to assume that many of those involved in the business will have to close down in the next decade. In a similar situation, a person involved in tailoring business can start a business of ready made garment or think of any other business.

2. Interest Rate Risks

Market interest rates continue to fluctuate. No interest is earned on the amount of money invested in the business stocks. But if the interest rate fluctuates in the market, in other cases the result of the interest due from the money invested also fluctuates. Many businesses invest a portion of their profits in long-term deposits or in the stock market. When the interest rate changes, the amount of income in these cases also decreases and increases. This leaves a risk.