Business Notes: The importance of risks and rewards such as profit

In the UK, people tend to be risk averse and afraid of failure. As the majority of new businesses fail, such fears are well-placed. Business failure can occur because of:

  • Lack of skills
  • Poor infrastucture
  • Finance shortages
  • Complexity of regulations, or red tape (paperwork)

If a business fails, it may leave debts to be paid off. The entrepreneur may have borrowed money to finance the buiness. However, most entrepreneurs are happy to take risks if the potential rewards are great enough. Of course, this depends on them doing their research to ensure that all reasonable steps are take to minimise the possibility of failure. The outcome of successful risk-taking will be a profitable venture. One business writer has described this balance of risk and potential reward as ‘smart luck’, or taking a gamble when you know the odds.

– Esjae x

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