What is Entrepreneurial Risk Management?

What is Entrepreneurial Risk Management?

"Risk Management" is the art and science of reasoning about what could go wrong, and what should be done to reduce those risks in a profitable manner. Risk is defined as the prospect of an event and its outcome. Risk management is the procedure of using activity methods and tools for controlling these risks.

Risk management is distinct on recognizing what could go wrong, assessing which risks should be distributed with and executing strategies to deal with those risks. Businesses that have recognized the risks will be better prepared and have a more profitable way of dealing with them.

Thereby, Entrepreneurial risk management (ERM) is introduced. Entrepreneurial risk management (ERM) is a group-wide strategy to recognize and prepare for risk with a company's fund, functioning, and objectives.

ERM allows managers to form the firm's generally risk position by commanding definite business segments to attract with or separate from particular activities.

All risks have two proportions to them: prospect of incident, and seriousness of the potential outcome. These two dimensions form four quarters, which in turn suggest how we might attempt to reduce those risks.

Key Elements of Entrepreneurial Management

  • Problem
  • Idea
  • Experiment
  • Solution


The first step in the risk management element is to identify all the problems that can negatively (risk) or positively (opportunity) affect the objectives of the project. In management we have to identify the problems occurring in the business or problems made by the employees.


We have to generate new ideas to accomplish our target. If we want to achieve the target, then we have to go with different ideas which are profitable.


The practice of experiment in entrepreneurship is to gain understanding relevant to entrepreneurship by actively experimenting in manual projects, and learning by doing.


After finding the problem then we have to identify the solution of the problem which is obtained in the management. After finding the problems, stay calm, then start general and work toward specific problems.

The solution is one of the most important aspects of entrepreneurship. As both the founder of the management and the leader of our team will be responsible for identifying and solving the problems.

Types of Risks in Entrepreneurship

Major form of risk which an entrepreneur needs to take care of are as discussed below −

  • Strategic Risk
  • Economic Risk
  • Financial Risk
  • Market Risk
  • People Risk
  • Personal Risk
  • Technical Risk

Strategic Risk

Strategic risk refers to the internal and external events that may make it tough, or even unfeasible, for an institution to attain their target and strategic goals. These risks can have serious outcomes that affect organizations in the long term.

Strategic risk is a classification of risk in the same way that risks such as functioning risk, commercial risk, influencing risk and regulatory risk are. Occasionally, strategic and functioning risk can be confused with one another, but we will get to the dissimilarities later.

Economic Risk

Economic risk is the risk faced by a firm or a company that has a foreign branch or investment in a foreign country because of factors such as exchange government policies, change in government, decrement in the credit valuation of foreign investment or important development in the foreign exchange affecting the business of the organization.

Financial Risk

Financial risk is the likelihood of losing money on an investing or business deal. Further more common and well defined financial risks comprise credit risk, liquidity risk, and functional risk. Financial risk is a type of hazard that can result in financial loss to interested candidates.

Market Risk

Market risk is an estimate of all the factors influencing the presentation of money markets. From an investor's viewpoint, it refers to the likelihood of an investor undergoing losses due to factors that affect the general performance of the money markets in which such investor has made investments.

Market risk is defined by "organized risk". The same cannot be abolished through assortment, no matter what it can be restricted against in many ways.

People Risk

Most people are risk-takers by essence, or at minimum calculated idealists with a clear idea of action to start a new product or utility to fill a space in the industry. On an individual level, many people take high-risk to leave permanent jobs to throw their efforts (and sometimes their own money) into starting a business.

Personal Risk

The process of applying risk management principles to the requirements of independent consumers. It is the process of recognizing, estimating, and treating personal risk (including, but unlimited, to allowance), pursued by executing the treatment plan and observing over time.

A personal risk management provides assurance through the defense of tangible assets and protection from the potential damage from unexpected liability exposures.

Technical Risk

In the business world, technology risk is the ultimatum of management technology failure that could deal with IT security and economic intelligence.

This IT risk can come in many forms, including ineffective, fraud, and virus. Technical risks (sometimes also technological risks or innovation risks) in risk management is a phase that refers to the type of business risk. These are the risks created by the use of new or unproven technologies or technical appliances or means of production.

Benefits of Entrepreneur Management

Entrepreneurship is the dynamic process of creating incremental wealth and innovating things of value that have a bearing on the welfare of an entrepreneur. It provides civilization with an enormous amount of goods and services and enhances the growth of social welfare.

The key benefits of entrepreneurship are - creation of job opportunities, innovation, and improving productivity.

Job opportunities

Entrepreneurs frequently have several jobs where they gain the compulsory skills before actually beginning their own companies. Common jobs for entrepreneurs include those in marketing, business development and management. Entrepreneurs frequently pursue jobs in industries they want to start a company in.


Innovation is any new idea, procedure or outcome, or a change to an existing product or process that contributes to that existing product or service. Innovation management involves the process of managing a company's innovation policy, starting at the beginning of creativity, to its end of successful execution. It encloses the conclusion, enterprise and practices of forming and executing an innovation strategy.

Improving Productivity

Improving productivity commonly means obtaining more out of what is put in. All attempts were directed to improving the productivity of industry and farming. Any increase in salary must reflect improved productivity.

As businesses and workers become more systematic, costs fall, profits and incomes grow, increasing demand, and economic growth and job creation accelerate. “Productivity isn’t everything, but in the long run it’s almost everything.


The risk analysis process assists the successful and well organized operation of the organization by recognizing those risks which require awareness by management. They will need to classify risk control actions in terms of their potential to benefit the management.

Updated on: 07-Jul-2022

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