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Entrepreneurship risk management

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Entrepreneurship risk management

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Entrepreneurship risk management

  1. 1. On the Commitment Process Ziya G. Boyacigiller This presentation was created and given by Ziya Boyacigiller who was leading Angel Investor and a loved mentor to many young entrepreneurs in Turkey. We have shared it on the web for everyone’s benefit. It is free to use but please cite Ziya Boyacigiller as the source when you use any part of this presentation. For more about Ziya Boyacigiller’s contributions to the start-up Ecosystem of Turkey, please go to www.ziyaboyacigiller.com
  2. 2. Copyright © Ziya G. Boyacigiller 2003,2004 Side Bar: Risk Management  Risk management involves reducing either the probability or the seriousness, or both, associated with a potential future event.  Multiplying probability times seriousness shows you the magnitude of risk you are taking.  Example: If you are afraid of a fire in your house, you can: • Eliminate matches, use UL-approved appliances, have automatic fuses to reduce the probability of causing a fire (preventive planning) • Have a fire-extinguisher, fire-ladder, evacuation plan, smoke alarms to reduce the seriousness in case there is a fire (contingency planning)  Example: Epidural use – there is a small chance of death (probability is low but seriousness is, like, infinite…)  Example: Picking your child from day care – would you take any risks at all?
  3. 3. Copyright © Ziya G. Boyacigiller 2003,2004 Why Quantify? 1. Entrepreneurs do not like risk. 2. Risk is essential to being an entrepreneur. 3. Risks should be:  Identified  Quantified (estimate)  Analyzed  Managed
  4. 4. Copyright © Ziya G. Boyacigiller 2003,2004 The main function of your business plan is to help you perform risk management – to assess the feasibility of your plans for your business…
  5. 5. Copyright © Ziya G. Boyacigiller 2003,2004 “Blue Print” for your Business Just like engineers draw their ideas on paper, called a blue print, before they have it built, entrepreneurs write their ideas on paper, called a business plan, before they start a company for essentially the same reason: Trial and error is quick and inexpensive when done on paper… This is the reason behind why you need to do a feasibility analysis, or blue print, for your business.
  6. 6. Copyright © Ziya G. Boyacigiller 2003,2004 Causal vs Effectual Planning  When future uncertainties are few (causal planning), a detailed (risk analyzed) business plan can be prepared  When future is uncertain and many changes are expected (effectual planning) a detailed (risk analyzed) business plan for ONLY the “next phase” of the business should be done.
  7. 7. Copyright © Ziya G. Boyacigiller 2003,2004 Causal vs Effectual Planning  When future uncertainties are few (causal planning), a detailed (risk analyzed) business plan can be prepared  When future is uncertain and many changes are expected (effectual planning) a detailed (risk analyzed) business plan for ONLY the “next phase” of the business should be done.

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