Risks

This semester, I am taking the Risk Analysis class. The class basically covers the risks that a biotech company can encounter during start-up, development and commercial stages. The risks are divided into three categories, which is, academic/government/other companies, business and commercial risks. For social entrepreneurs, I believe that there are some in common.

First, for the first kind of risks, it mainly depends on which organization the entrepreneur cooperates with to do the R&D work. If it relies on universities/academic institutions to do the research and development, there will be risks such as the owner of the intellectual property and the possibility of being industrialized. If the entrepreneur seeks cooperation with the government, the risk is mainly about the procedures and standards. As to the other companies, the management, finance and organization structure will be the problems to consider. For social entrepreneurs, there will be similar situations. Some rely on a university to develop products. For instance, the create lab we visited last time works with CMU. Others may seek funding from government. My childcare center project is an example. There are ways to mitigate the risks, such as signing an option agreement with the university to define the ownership of the IP. It is critical to prepare for the risks that may be encountered in the future. Otherwise, even if the products or the services are ready to be delivered, the organization may have legal issues to produce or distribute them.

For the business risks, they are the corporate structure, finance and management risks. This part of risks are also very much covered by this class, Social Innovation Incubator. The corporate structure is basically the choice of a team. On a team, there must be people who have different skills. As to finance, it is source of funding and the financial sustainability.

The commercial risks are market trends, geographical considerations, channel access, and partnering. I believe that all the social entrepreneurs are to deal with the unsolved social issues. Actually, the first step is to have a clear picture of the market trend and the have a knowledge of the customers’ needs. Geographical considerations are also an issue. Take my project as an example. There are four trading areas in Shanghai but I may not open four childcare centers. It depends on the likelihood that the parents working in the areas will send their children to the nearby elementary schools. In shanghai, most of the schools only accept the students who live in the district where it is in. Only a few open to the whole city. My target schools are those who have no geographic restrictions. Usually, those schools have higher academic performances and more expensive. The parents are willing to send their children to such schools. As to the channel access, it relies much on the customers and the locations. The road conditions of a place, the norms of the target market and etc.

I find it true in the article, Disciplined Entrepreneurship, that the ability to manage uncertainty is the critical task. Even if one can have a general idea of the risks met in the future, unexpected issues will always happen. However, I still have very little idea about the disciplined approach. The three stages one should take is quite reasonable. My question is about the time and feasibility. Will it take long time to deal with risks? Will other problems arise during the time? Also, what if one solution does work out at the experimental stage?