Risk in an entrepreneurial activity

Entrepreneurial risk: the origins and essence. The classification of business risk. Economic characteristic of entrepreneurial risks an example of joint-stock company "Kazakhtelecom". The basic ways of the risks reduction. Methods for reducing the risks.

Рубрика Экономика и экономическая теория
Вид курсовая работа
Язык английский
Дата добавления 07.05.2013
Размер файла 374,8 K

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To organize a profitable business in present-day conditions, an entrepreneur should have good training, as well as the necessary knowledge in the field of economy, politics, psychology, law, organization of production and be able to collaborate with scientists, experts on marketing, and the owners of capital. Overseas specialists possess such qualifications reputed as the business potential of the country. In decision-making can be occurred information overload, then deciding in time can prevent saturated flow of information about the environment or the shortage of information (typical, a normal situation for decision-making related to the risk of getting the results). Information overload blocks work on the decision-making, give rise to its complication.

Marginal cases of decisions involving risk are reinsurance and adventurism. In reinsurance the risk is reduced to zero, adventurism leads to the greatest possible risk. Reinsurance could lead to understated effect, adventurism to non- reception of planned result due to excessive risk. It is necessary an optimal solution, which should contain a reasonable calculation of the risk. It should take advantage of scientific prediction. Valid risk is almost always useful. It improves the efficiency of business activities.

The decision is the basis of the control, best-way choice of action from several eventual. Under optimal solution should understand something that is between good and best. Optimal solution must correspond to the conditions of production, fit for work and acceptable to it, as well as to provide a small degree of risk and achievement of project results. The best solution is to achieve the main result by entrepreneur's own labour.

Entrepreneur may prevent or reduce risk substantially through leasing, conclusion of a contract on off-take, rendering of service, transportation and storage of products. In terms of leasing a substantial part of the risk of anientisement or loss can be entrusted to the renter by special clauses in the contract (finance lease). At the conclusion of contracts of sale of goods or services, an advantage pass to the buyer or ambassador in purchasing which provided responsibility of producer for defects in the product in the course of exploitation or replacement of unsound goods. So the risk is the responsibility of the manufacturer.

The mutual risk of parties entering into the contract occurs in transporting or storing the goods. The drop in prices during transportation or storage of products and related loss incur its producer. At the same time, the material loss during storage or transport of products entrust on transport or other organizations carrying out this storage or transportation.

Making the right decision is the success of an entrepreneur because it significantly reduces risk and enables you to get high eventual result. Managerial decisions must follow the rules, the main of which were formulated by the American sociologist M. Rubinstein Gorfinkel V.J. Course of business. -M.: “Finance” 1997, P.308.:

1. Try to get an idea of the problem as a whole, before you go into the details.

2. Do not make decisions, until do not consider possible variants.

3. Hesitate - even the generally accepted truth should evoke distrust, don't be afraid to refute them.

4. Try to look at facing you problems from many views, even if the chances of success seem minimal.

5. Look for the model or its analogy that help us to understand better the problem. Use schemes and diagrams. They will catch on a complex and extensive problem literally at a quick glance.

6. Ask questions as much as you can your selves and partners. Properly asked question may sometimes radically change the contents of the response.

7. Do not satisfy by the first solution that comes to mind. Try to find its weaknesses. Try to find other solutions to this problem and compare them with the first.

8. Talk to someone about problems, before the making of the final decision.

9. Don't ignore your intuition. The leading role of logical thinking in the analysis of the problems is unquestionable, but cannot be minimized and value of intuition.

10. Remember that everyone looks at life and emergent challenges with it's especially point of view.

3.2 Methods for reducing the risks

Different methods are using to reduce the risk: diversification, insurance, limitation, reservation of means for unforeseen expenditures, risk allocation, getting more information about the forthcoming election and results.

Diversification means reducing risk by investing in a variety of assets. If the asset values do not move up and down in perfect synchrony, a diversified portfolio will have less risk than the weighted average risk of its constituent assets, and often less risk than the least risky of its constituents. Therefore, any risk-averse investor will diversify to at least some extent, with more risk-averse investors diversifying more completely than less risk-averse investors. Enterprise, bear losses on one activity, can make a profit at the expense of the other spheres of activity. Diversification permits to increase sustainability of companies to changes in business environment. The best is the simultaneous financing of 10-15 projects which allows break up the risk. In reserve for possible additional payments in the later stages of the development of an enterprise company holds 10-20 per cent of the Fund. To further reduction of the risk, practice joint-finance projects by several private firms "risk capital".

Insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. Property insurance can have the following form: insurance risk contracting the building, equipment insurance, cargo insurance, etc. Accident insurance includes: insurance civil liability and professional liability insurance. Hedging are used widely, it is one of the type of insurance. Dyuisembayev K.Sh. Audit and analysis of financial statements. -Almaty: Нarzhy-Нarazhat, 1998. p.512. It is insurance prices from the risk of any unwanted drop for manufacturer or disadvantages for the consumer. On the objectives and operation technique, hedging divided in hedging of selling, i.e. the transaction by producer or owner of the goods, for the insurance of futures reducing prices on goods selling, either have already available or have not produced yet, but provided for compulsory delivery in given period of time; purchase hedging, i.e. the transaction a futures contract by consumer or seller with the aim insurance of increasing the price of purchase the product that in the future will be required.

Limitation involves setting limit, i.e., certain amount of expenditure, the sale of goods on credit, amount on deposit of capital (investment), etc.

Reservation of means for covering expenditure involves establishing the ratio between potential risk and the size of the expenditure required to overcome the consequences of those risks. This method of risk typically uses to perform a variety of projects. In general, the reserve is used to fund additional work, compensation for unexpected changes of material and labour costs, overheads and other costs arising in the implementation of the project.

Allocation of risk involves division of risk between project participants. Growth in the size and duration of investment, the introduction of new technologies, high dynamic of external environment increases the risk of project. Way-division of the risk is operation of factoring. In practice, foreign banks development factoring operations relates mainly to the need for each supplier in the accelerated receipt of payments that were questionable. Usually in these situations, there is risk claims payer. Bank, repaid such a claim from the supplier may suffer losses. Factoring operations belong to the high-risk operations. The size of the commission depends on the degree of risk (to the level of "questionable" redeemable debt), and the duration of the contract deferment. In some cases it comes down to 20% of the amount of payment.

Any management decision is made in situations where the results are undefined and information limited. Therefore, the more information the better preconditions to make the best prediction and reduce risk. Cost information is calculated as the difference between the expected value of any activities when there is full information and expected value, when the information is incomplete.

Risks affect on various aspects of the enterprise and, as a rule, influence are negative. Especially harmful an attendance and influence factor of risk on the company that have crisis already. Work to stabilize the situation, should to start with risk management. For example, to develop and introduce economically advisable for business advices and activities aimed at reducing financial losses associated with risk.

Any company interested in reducing potential losses related to economic risk, should decide for themselves several problems:

- Assess the possible losses associated with economic risks;

- Decide whether it leaves a certain risks, i. e. whether respond on them itself, abandon on them or transfers some or full responsibility on others;

- Firm should to elaborate a program management, whose main objective is to reduce potential losses (for those risks or the part of the risks that it leaves itself).

To summing up all above, it can be drawn a conclusion that there are three main principle of risk-reduction in the common business practice:

* Not to risk more than the capital permits;

* Don't forget the consequences of the risk;

* Don't run the risk much for the sake of the small.


Finally it is possible to conclude that the enterprise inseparably linked with risk. With a business risk understand the probability of occurrence of an undesirable event, where the last one is understood as an unfavourable event for the net profit of the enterprise. It should be noted that the circle of risks is very broad and varied in today's business.

In modern economy are making additional elements of uncertainty in entrepreneurial activities that extends the zones of risky situations with more and more economic environment. In these cases arise the ambiguity and uncertainty in the expected end results, and therefore increase the degree of risk business. And, despite technological progress, the risk does not have a tendency to shrink. Entrepreneurship is constantly developing and solving some problem entrepreneurs constantly faces new ones.

These circumstances predetermine the actuality of research nature of the entrepreneurial risk and require further efforts aimed at the constant adjustment of the definitions of this the most difficult concept.

Significant potential of the risk is in the internal enterprise activity, peculiarities of organization of its production and financial management. The greater risk lies in the existing enterprise system making incorrect and sometimes disastrous solutions for enterprise. The less attention is being paid to the perspective analysis and planning of its activity, compatibility with the socio-economic and socio-political environment, the higher degree of risk. Therefore, accounting, research, and then manage both external and internal risks must become one of the most important tasks in modern conditions of the management of enterprises applying for successful operation. Managing business risk -- is a critical goal in the activity of any enterprise.

For better understanding of the theoretical part of this topic, consideration was given to analyses the business risk in the enterprise - JSC "Kazakhtelecom". In the end has been achieved the goals, notably:

· analysis of the current financial situation of the JSC "Kazakhtelecom"

· examination of possible risks in the enterprise

· development of measures to improve enterprise management technologies.

On the basis of the analysis of financial condition of enterprise risk and the methods used for risk decrease, developed recommendations to improve risk management system, such as: the need in usage of insurance, reservation of means, limitation in managing receivables.

In tote, it is advisable to conduct a study to determine the exact number of production, study of possible actions of competitors and customers ' preferences.

However, by the long-term predictions “Kazakhtelecom” is a monopolist in the Kazakhstan market in the sphere of telecommunications. And despite a slight deterioration in financial indicators during the crisis, are predicted the widening of the company's clientele, also the introduction a number of major infrastructure projects, new technologies and the telephone network of villages and the development of broadband Internet access.

Contrary to beliefs, risks in business are also needed, as profit. Without them, entrepreneurship as a tool for economic development will not be able to perform its functions. The risks are executed "natural selection" among the people, who want to become successful businessmen. Without this, it is impossible to imagine anything other than the chaos in the business environment. Imagine what would happen if everyone can open their own business without the probability of bankruptcy. That would be? Yes, nothing. Business simply will lose its value and will cease to be a source of profit, which is very badly affect on the economies. Therefore economical activity should be a survival-of-the-fittest environment.

As a rule, the most exposed to risk young entrepreneurs. Lack of experience, knowledge, relationships - all this will play a role. And a businessman that has gotten over the difficulties in the beginning of the road has all chances of further success.

To unexpected circumstances it needs to be prepared in advance. Need to understand a simple truth. The secret of success businessman is not in the ability to avoid the risk and the ability to correctly manage. That is why in the business is so important self-confidence.


1. The Republic Kazakhstan constitution - Almaty, 1995

2. The civil code of Republic of Kazakhstan - Almaty, 1998

3. The course of the economy: Raizberg B.A. - Moscow: UNITY - 1997

4. Risk Management: Khokhlov N.V.,Handbook - 2001

5. Economic risk. - Garanturov B., Moscow: Delo i Servis, 1999

6. Business: the Textbook for high schools V.J.Gorfinkel, G.B.Poljak, V.A.Shvandar. - Moscow: UNITY, 2001

7. ABC of enterprises: Textbook/Under the editorship Raizberg B.G. - M.Economic- 1995

8. Arkhipov A.P. The insurance business risks in business. “Finance” - 2002

9. Risks in modern business. Loboda P.G. Grabovoj S.N. and others -M.: "Alane", 1994

10. Markova V.D., Kuznetsova S.A. Strategic management: a course of lectures. - INFRA-M; Novosibirsk, 1999

11. The Article “Methodology of assessment financial risks”. Hahonova I.I.

12. Dyuisembayev K.Sh. Audit and analysis of financial statements. -Almaty: Karzhy-Karazhat, 1998

13. http://expert.ru/kazakhstan

14. www.cfin.ru

15. www.kase.kz

16. www.pavlodar.com

Appendix 1

Consolidated financial statement of “Kazakhtelecom” on 2006-2008 years

(in thousands of KZT)




Income from sales goods and services




Cost of sales goods and services

64 608 214







Financing income

227 779



Other income

2 513 771



Expenditures on sales goods and services

1 993 599



Administration costs

16 831 275



Financing expenditures

3 496 391



Other expenditures

707 834



Profit share/(loss) of organizations, considerate on equity participation method

13 699 800



Profit (loss) since continuous activity period

42 891 778



Profit (loss) before taxation




Expenditures on corporation income tax

9 262 366



Total profit (loss) over a period of time before deduction minority interest




Minority interest

4 729



Total income(loss) over a period of time




Table1. Main indicators of financial accountability of “Kazakhtelecom” on December 31, 2008.


in th.KZT/pieces

Total current assets

42 641 788

Total long-term assets

287 781 840

Total current liability

35 749 602

Total long-term assets

103 601 890

Total capital

191 072 136

Income from sales

142 263 079

Cost of sales

91 804 127

Other operating income

21 231 111

Administration and other costs

49 437 152

Expenditures on corporation income tax

6 026 018

Minority interest

3 127 132

Total income over a period of time

13 099 761

Quantity of common stock

10 922 876

Gain on one common share


One common share dividend


Quantity of privileged share

403 194

One privileged share dividend


Table 2. Horizontal analysis of the profit and loss “Kazakhtelecom” JSC for 2007-2008 years (base year-2006 year)



Income from sales goods and services



Cost of sales goods and services






Financing income



Other income



Expenditures on sales goods and services



Administration costs



Financing expenditures



Other expenditures



Profit share/(loss) of organizations, considerate on equity participation method



Profit (loss) since continuous activity period



Profit (loss) before taxation



Expenditures on corporation income tax



Total profit (loss) over a period of time before deduction minority interest



Minority interest



Total income(loss) over a period of time



Table 3. Vertical analysis of the profit and loss of “Kazakhtelecom” for 2006-2008 years




Income from sales goods and services




Cost of sales goods and services








Financing income




Other income




Expenditures on sales goods and services




Administration costs




Financing expenditures




Other expenditures




Profit share/(loss) of organizations, considerate on equity participation method




Profit (loss) since continuous activity period




Profit (loss) before taxation




Expenditures on corporation income tax




Total profit (loss) over a period of time before deduction minority interest




Minority interest




Total income(loss) over a period of time




Appendix 2

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Appendix 3

Factors of market attractiveness and strategic situation of business

Market attractiveness

Business strategic situation

Market performance

* market size

* growth rates of market

* geographic market advantages

* dynamics of prices, the price elasticity of demand

* scope of key market segments

* market cycle

* other opportunities and threats the industry environment

* share of the market -controlled be the firm

* growth rates of strategic business units

* competitiveness of the company

* performance of the product range

* the effectiveness of the marketing system

Competitive factors

* the level of competition in the market

* trends in the number of competitors

* the advantages of industry leaders

* sensitivity to substitutes goods

* market share for the three main competitors

* the capacity of the company and its competitive advantages

Financial and economic factors

* barriers to entry and exit from the industry

* the level of capacity utilization

* industrial profitability

* structure of industry costs

* the level of firm capacity utilization

* the level of profitability of the company

* the level of technological development

* the cost structure of firms

Socio-psychological factors

* social environment

* Organization of business

* corporate culture

* staff performance

* company image

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