Risk and reward

• What is the impact of risk and reward on business activity?


  The impact is significant
• How are risk and reward related in business?


  They are two sides of the same coin
• What must businesses manage while striving for rewards?

  They must manage risks associated with failure, financial loss, and lack of security
• What are the main risks of business activity?

  • Business failure
  • Financial loss
  • Lack of security
• What is business failure?


  It is when a business cannot meet its financial obligations or generate enough revenue
• What are the consequences of business failure?


  It can lead to job losses, bankruptcy, and financial ruin for owners and investors
• What causes financial loss in businesses?


  Causes include poor financial management, economic downturns, or unexpected events
• What is the impact of financial loss on a business?


  It can result in reduced profitability, competitiveness, and ability to invest in growth
• What does lack of security refer to in business?


  It refers to risks related to data security, intellectual property theft, or physical security
• What can result from a security breach in a business?


  A security breach can lead to reputational damage, legal liability, and loss of customer trust
• How can entrepreneurs reduce risks in business?

  • Careful management of cash flows
  • Conducting thorough market research
  • Setting clear aims and objectives
• What is the ultimate reward that business owners strive for?


  Business success
• What does business success entail?

  It entails meeting or exceeding objectives like generating revenue and achieving profitability
• How is profit related to business success?


  Profit is a measure of the success of a business
• What can profit enable businesses to do?

  It enables reinvestment in growth opportunities, paying dividends, and providing financial stability
• Why is independence a crucial reward for businesses?

  Independence allows businesses to make their own decisions without external pressures
• Who are the external stakeholders that businesses may be subject to?


  Investors and creditors