ASSIGNMENT # 2

Submitted by: Ahmad Safiullah Khan

Roll Number: 18321519-009

Section: CS- 18 (A)

Submitted to: Ms. Asba Arshad

Course Code: MGT-303

Course Title: Entrepreneurship

Date: 28 Nov, 2020 (Saturday)

Semester: 5𝑡ℎ
Entrepreneurship is all about taking risk, if you take huge risk
you will be the star entrepreneur that is your dream but at the
same time there is the chance of failure. Discuss this statement
do you agree or disagree with it? Why?

Higher the Risk, Higher the Returns

Yes, it is absolutely true that higher risk produces higher return. In an

enterprise by the entrepreneur. Taking risk is the necessary element of
entrepreneurial activity.

Why Risk is essential element of Entrepreneurship

Higher risk is associated with greater probability of higher return and

lower risk with a greater probability of smaller return. This trade off which an
investor faces between risk and return while considering investment decisions
is called the risk return trade off.

Risk is the probability of undesirable outcome of entrepreneurial activity

such as loss or closure of business but at the same time it’s necessary to yield
return and grow the business. Degree of risk depends mainly upon the nature
and size of business. Profit is the reward for risk taking.

Reducing Risk

Risk can be reduced but it cannot be eliminated in entrepreneurship. The smart

and successful entrepreneur make every effort to reduce the risk without
compromising the returns.
There are two types of risks.

1. Controllable Risk
There are factors that are controllable by the entrepreneurs to eliminate
the partial risk such as fraud, theft, irrational decisions etc. The smart
entrepreneur take all the precautionary measures to stop such unpleasant
events in his business.
2. Uncontrollable Risk
A part of risk is systematic and cannot be controlled by the entrepreneurs
such as inflation, law and order situation and legal restrictions on
business etc.

The calculated risk is the right strategy to avoid huge losses in

entrepreneurship.

There are some important points which an entrepreneur should consider before
taking risk.

 Competition in the market.

 Market trends and fluctuations.
 Higher cost of production.
 Legal formalities & restrictions.
 High cost of borrowing.
 No backup plans.
 Exchange rate fluctuations
 Lack of understanding of market