Good entrepreneurship skills are very essential for the survival of a business. This paper will generally discuss the different factors that affect entrepreneurship. The paper will start by introducing the topic of entrepreneurship to its readers. The introduction will also mention the main elements of entrepreneurship that will be discussed in the paper.
An evaluation of the importance of having a proper risk management procedure will then be carried out in the paper. The discussion of a good risk management procedure will involve the explanation of the process that should be followed so as to manage risks effectively. Some of the elements of the risk management process that will be discussed in the paper include identification of risk, assessment of potential risk, formulation of a risk management plan, implementation of the plan and finally the review and evaluation of the plan.
After the discussion on risk management by an entrepreneur is complete, a discussion concerning essential skills required for entrepreneurship will be done. Some of the skills that will be discussed include leadership skills, strategy formulation skills, marketing skills, communication skills and finally human resource skills.
A discussion of the internal environment factors affecting a business will then be done. Some of the factors that will be discussed include business policies, organizational structure, business resources and leadership style of the business will also be discussed. Finally the external environment factors affecting a business will be discussed. The external environment factors that have been discussed in the paper include the demographic, economic and political factors that affect a business.
An Effective Approach by Entrepreneurs of Mitigating Risk and Uncertainties
Entrepreneurship is a skill that not everyone starting a business possesses (Demmer 2007). Effective entrepreneurship involves an innovative and strategic approach towards the management and operation of a business so as to make sure that the business is successful in its operations. Entrepreneurship involves establishing appropriate measures in a business that will make the business to be successful and profitable.
One of the qualities essential to an entrepreneur is the fact that he/she needs to have the ability to manage a business in the face of risks and uncertainties. In order for an entrepreneur to be successful in managing a business that is bound to face the risks and uncertainties, he or she needs to have good risk management skills. Risk management involves the process of being able to identify and a risk so as to be able to come up with an appropriate strategy of dealing with the risk.
Risk management is a process which requires an entrepreneur to be able to follow some steps in order to manage the risks and uncertainties facing the business effectively (Evans 2004). The first step that an entrepreneur must take in order to deal with the risks facing his/her business involves the identification of all the risks that are likely to face his/her business. There are several methods that can be used by an entrepreneur to identify the risks facing his/her business.
For example, an entrepreneur may choose to identify the risks facing his business on the basis of the businesses objectives. When using this method, any event that is likely to jeopardize a business’s ability to achieve its objectives qualifies to be regarded as a risk facing the business. An entrepreneur could also choose to use scenario analysis as a method of identifying risks. In this approach, various scenarios that are likely to face a business are analyzed. Any scenario that is likely to create an undesirable outcome to the business is identified as a risk. Entrepreneurs could also identify risks by identifying the common risks that are likely to affect a business. Common risks are the obvious risks that are likely to face a business.
Once an entrepreneur identifies the potential risks that are likely to face a business, he/she should then execute the next step of risk management which is risk assessment. Risk assessment involves evaluating the severity of the loss the business is likely to incur if a potential risk occurs. The next step of the risk management that an entrepreneur should follow involves the creation of a risk management plan. A risk management plan gives a guideline of the steps to be followed or the activities that should be done to mitigate the loss incurred by a business if a loss occurs.
The next step that an entrepreneur should follow after formulating a risk management plan is to implement it. Implementation involves the following all the procedures and completing all the activities that had been documented in the risk management plan. Finally, an entrepreneur is expected to review and evaluate his risk management plan in order to change or improve any areas that may require improvement.
The above process will go a long way in ensuring that a business remains stable even when it incurs a loss as a result of the occurrence of a risk. An efficient risk management program will help to ensure that the business incurs no risk which it had not anticipated, hence, ensuring all the risks facing a business have a mitigation plan.
Skills Required in the Operation and Management of a Business
In order to be able to effectively manage a business, an entrepreneur needs to have a variety of skills to handle different aspects affecting the business. For example, it is very essential for entrepreneurs to have proper leadership skills. Effective leadership skills portrayed by the entrepreneur will help to give his/her employees confidence in the business, hence, motivating them to work hard towards making the business prospers.
It is also very essential for an entrepreneur to be strategic when formulating business plans. Entrepreneurs need to first start by carrying out a strategic audit followed by the formulation of a business plan that will be aimed at enabling the business to become more efficient in its operations. It is easy for most entrepreneurs to forget or undermine the importance of having a strategy for the business. Most entrepreneurs often run business as a day to day obligation. However, it is prudent for them to have a strategy that will assist them to run their businesses in a manner that will allow them to be able to achieve long term goals.
Entrepreneurs also need to have good marketing skills in order to be able to understand and respond to customers’ needs and preferences effectively. Good marketing skills are essential in enabling an entrepreneur to convince customers to buy the business’s products and not those of their competitors.
It is also essential for entrepreneurs to have good communication skills (Weiss 2007). The ability to communicate well is essential since it helps entrepreneurs to communicate effectively with different stakeholders of the business such as their employees, customers and directors. A state of good communication between an entrepreneur and a business’s stakeholders helps to eliminate any misunderstanding that is likely to affect a business negatively.
It is also very essential for an entrepreneur to have good human resource skills and the ability to manage various classes of people. Good human resource skills enable entrepreneurs to be able to select the best skilled and qualified personnel during recruitment. Human resource skills are also essential in guiding and motivating the employees of the business to work hard towards realizing the businesses goals and objectives.
Every business entrepreneur should also possess good accounting skills and the ability to understand the financial reports of the business he/she operates in. Good accounting skills help an entrepreneur to ensure that there is no embezzlement of the businesses funds by any of his/her employees. Good accounting skills are also helpful in enabling an entrepreneur to come up with a financial forecast which is very essential in business planning. A financial forecast allows the business to predict likely outcomes when they are evaluating the appropriate strategy to adopt for their businesses.
Internal Environment Factors Affecting a Business
Internal environment factors of a business refer to the factors existing within the business that the business has the ability to control or change in order to favor the operations of the business. An example of a factor that exists in the internal environment of a business is its policies. A businesses policies act as a factor that affects the internal environment of a business since they determine the manner in which a business will handle any issues arising within the business.
The organizational structure of a business is another of internal environment factor of a business. The manner in which the chain of authority is organized in a business determines how efficient the aspect of authority will work to ensure that a business’s operations and activities be carried out.
A business’s resources also forms a crucial part of the business’s internal environment. This is because the manner in which a business utilizes its resources will determine whether it will be successful in its activities. If a business utilizes its resources for profitable causes it will be able to make good profits. Another factor of the internal environment of a business is the leadership style used in the business. If the leadership style used in the business is effective, the business is likely to be more profitable than a business whose style of leadership is not effective.
External Factors Affecting a Business
There are number of external environment factors that affect a business. External environmental factors refer to those factors that affect the business but the business has no control (Lowe 2009). A good example of a factor in the external environment of a business is the demographical environment of a business. The demographical environment of a business refers to the gender and age composition of a business’s market. No business has the power to control the number of people of a certain gender or age existing in a market.
Likewise, no business has the ability to control the economical environment facing it (Smilor & Sexton 1996). Businesses are, therefore, bound to suffer involuntarily during periods of recession or benefit when the economy of the market they operate in is experiencing a boom. The political environment of a business also forms part of the external environment of a business. The political environment of a business refers to whether a business’s market is experiencing a state of peace or turmoil. No business has the ability to control the existence of peace in their country. The political environment of a business also involves the rules and regulations put in place in a country so as to govern the operations businesses in the country. All businesses are expected to abide by the rules and regulations put in place by the political systems around them. However, little or no businesses have the ability to take part in the formulation of the rules and regulations that govern them.
From the above discussion, it is evident that entrepreneurship involves a lot of aspects. Any individual intending to be successful in entrepreneurship should, therefore, ensure that he/she is well versed in all matters affecting the management and running of a business e.g. risk management and the possession of proper business management skills.