Risk is like white hair….ok, a bit like white hair. It is something startup founders will never stop dealing with. It is something entrepreneurs need to learn how to live with; even when they manage to do something to hide it for some time.
Of course, as “Investopedia” clearly states, Risk is “the chance that an investment’s actual return will be different than expected”. However in Finance, Risk has a lot of different types which startup founders need to carefully consider every time they take a decision or when they assess previously taken decisions.
Let’s look at the most important types of Risk that new companies need to be really aware of.
– Operational Risk: A major type of Risk that deals mainly with human and technical mistakes in implementing important everyday actions for company operations.
– Financial Risk: Is the exposure of a company to market and credit risk. Only large companies with available budgets can invest on serious credit risk management. Therefore it stands out as a great danger especially for inexperienced startup founders.
– Project Risk: It is a Risk on processes related to projects implementation. It greatly depends on people and resources.
– Opportunity Risk: A term used for more than one purposes. However, it is strongly related to market and/or product assessment. Generally, it refers to decision taking for investing in a new…opportunity. A lot of analysts use the term Market Entry Strategic Risk instead.
– Competitive Risk: Market assessment also includes knowing your competition and your abilities. Even more, young entrepreneurs need to check if they need intellectual property, before a competitor surpasses them.
