Taking a calculated risk

Risks and rewards

There are risks that are very common when setting up a business or when making a decision. The key to success is making the correct decision and in some cases taking a risk. They are likely to face some already existent competition from businesses that maybe selling the same sort of products, in this case then they will need to think about what sort of things they could do to get that edge forward of the competition, which could be creating a new product to sell that the customers could really take a shine to and this is possible to do by taking a calculated risk. 

For Example if Bob wanted to expand his business he would take a calculated risk to attempt to make his business big, of course he would have to take into consideration of what sort of downsides and upsides there are.

The rewards can be very good as it could increase sales or popularity, this will then give the business more opportunity to expand their business, maybe make it into a franchise.

Downsides
There are so many things that could go wrong when making a risk, for example if you don't pay attention to what sort of products the customers buy then they aren't going to be interested in buying the products. This will then cause the business to lose sales, profit and will soon go into liquidation.

Upsides
The upsides is that it could increase sales, profit, customer satisfaction. making the right decisions can really improve your business for the better.

Making mistakes

This can affect your business greatly as it can decrease customer numbers which will then have an impact on profit, and we all know, no profit equals no sustainable business.

Questions:
-Which one of the following most accurately explains the purpose of attempting to calculate risk when making business decisions?
a) To make sure that a decision involving no risk at all is made
b) To attempt to make a decision involving the greatest risk and the least reward
c) To try and make a decision where the risks will be outweighed by the rewards
d) To make sure that all risks have been identified before a decision is made

-Which three of the following are most likely to be considered when attempting to calculate the risk of a business
decision?
a) What are the options that involve no risk to the business
b) What are the likely benefits for the business if the decision results in success
c) What options exist where success is guaranteed.
d) What are the likely costs for the business if the decision results in failure
e) What actions can managers take to remove any chance of failure
f) What are the chances of failure threatening the survival of the business