Categories of risks in entrepreneurship

Risks is a situation or condition of portending danger and whose probability of occurrence can be estimated. For example our environment today fire accident is a common occurrence (especially during dry season). The probability that a fire accident will occur in a place can be predicted or estimated, the moment one has certain data.

There are many risks usually associated with running an enterprise, and which an entrepreneur may face in entrepreneurship. To serve as a lesson or knowledge to any entrepreneur, these categories include.

1.       Controllable and uncontrollable risk: Controllable risks are internal risks which may be controlled to some extent by way of careful planning and adequate research efforts. For example, such risks as labour unrest, bad debt, theft of properties, accidents to workers etc are to some extent controllable; taking, measures to eliminates or reduce their impact. While uncontrollable risks are risks that does not lend themselves to control by the organization. The occurrence of such risk may not be predictable e.g. technological changes, legislative decrees, price changes, natural disaster, uncertain demands. Etc

2.       Insurable and non-insurable risks: Insurable risks are risks that can be transferred (or which effects can be reduced by purchasing insurance policy) by organization to another organization under insurance policy agreements. In modern business organization the common practice is for organization to purchase insurance policies from insurance policy from insurance firms. Under such agreements, an insurance company will assume responsibility for any losses that may occur. However, such responsibility is usually based on a price-called premium, which the insured organization will pay to the insurer on a regular basis. Such risks which insurance companies may insure against include fire, burglary, floods, fraud, theft, liability etc. insurance has become an important obligation in modern businesses because any serious loss by the company may put such companies out of circulation. This is undesirable. However, in deciding whether to take an insurance policy or not, the major factor usually considered are the extent of possible disaster (loss) and the likely impact of a disaster on the organization. While non-insurable risks are those risks which cannot be predicted and as such they may be difficult to be estimated. Such risks, since they cannot be estimated or predicted, are not of interest to insurers, hence they are uninsurable risks. Such risk includes natural disasters, technological changes, economic conditions (e.g. depression or recession), obsolescence products, as a result of changes in tastes, outbreak of war, etc.

3.       Personal and Non-personal risks: Personal risks are those that involve personal losses and financial losses to the entrepreneur. such risks include theft, loss of sale, obsolesce, bad debt, etc. and Non-Personal risks are those involving loss of intangible item like good will. Such risks may arise from incidences such as marine losses, etc.