It is now quite
clearly understood that entrepreneurship is not necessarily risky. What is
risky is not planning for the risks that one might encounter through the
journey. Indeed, we cannot plan for everything that might happen, but it does
seem a good idea to understand what risks our venture can encounter and how to
mitigate or overcome those risks.
My research led to
Cayenne Consulting. http://www.caycon.com/
Their mission, as
their founder states, is ““To
help entrepreneurs get their act together before they talk to investors.”
What I really liked
was the founder Mr. Akira Hira’s article – “What Kills Startups”.
The paper talks about
Risk and Reward and offers entrepreneurs a framework to manage risk. According
to him, risk can exist in any situation where there is a possibility of
an outcome that we would rather avoid. This clearly implies that
almost every day to day situation can carry risk. So, as in life, in business
too it is simply not prudent to worry about every single risk. So one of the
first things an entrepreneur can do is classify risk into categories –
- Ignorable Risks (Quadrant A)
- Nuisance Risks (Quadrant B)
- Insurable Risks (Quadrant C)
- Company Killers (Quadrant D)
It would be good to
note how Mr. Hira has given risks 2 dimensions – Consequences and Likelihood.
Quite naturally, the risks that have higher consequences and a higher
likelihood should demand our attention the most.
The quadrant also lets
us answer the question – Does the benefit of mitigating a risk outweigh the
cost of doing so? For me, this is most critical in identifying risks that can
be tackled fastest, easiest and simplest. Basically the low hanging fruit needs
to be gathered first.
Going further, the
risks in Quadrant D can generally be classified into the following - (I have
also provided some of the questions I am asking my own social venture plan)
- Market Risks – Because the product caters to a younger population, is the price of my product higher than their parents ability to purchase?
- Competitive Risks – Because of potential government subsidies, can a competitor launch a similar product before mine?
- Technology & Operational Risks – What if user information stored online is under threat of hacking?
- Financial Risks – Do I have sufficient funding to scale up? What about cash flow?
- People Risks – What if people posing as company agents defraud customers?
- Legal & Regulatory Risks – Does my product have higher taxes because it is a GPS based device?
- Systemic Risks – Can people get loans/EMI to buy my product?
My question now is, is
there a social risk too? Can my product overcome the mindset of teenagers who
are loath to be tracked?
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