Entrepreneurial behaviour

1. Risk-Taking &
Resourcing Skills
Mohd Rafi/Ghazali Ahmad, Ph.D
©2009/10

2. Entrepreneurs say they:
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Often started with a big company, then quit
Are lone rangers, independent
Are persist, persevering, disciplined
Are confident, self-reliant
Have a broad education, are generalists
Have basic business skills
Started young
Are good listeners
Engage in calculated risk-taking

3. Entrepreneurs say they:
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Are opportunity-driven
Know how to assess opportunities
Have, or quickly learned, team-building skills
Have strong technical skills
Appreciate mentorship
Are able to manage growth
Understand the importance of social
interaction and common sense
Play “not to lose”
Are frequently serial entrepreneurs

4. Risk Taking Skills

5. Some Quotes
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"He who is not courageous enough to take risks will accomplish
nothing in life." - Muhammad Ali
"Our lives improve only when we take chances -- and the first and
most difficult risk we can take is to be honest with ourselves." Walter Anderson
"It is easy to be brave when far away from danger." - Aesop
"If you don't fail now and again, it's a sign you're playing it safe. " Woody Allen
“Risk is just like shadow. It follows you wherever you go, so what.
Forget about it and focus on what you are doing. Remember, no
pain, no gain; no risk, no return - Dell
APT 2013
© 2009 Dr. Rafi/Dr. Ghazali
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6. Risk – The root of the
word (morphology)
Rizq (Arabic)
Risicum (Latin)
Risque (French)
Risk (English)
APT 2013
© 2009 Dr. Rafi/Dr. Ghazali
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7. Risk – Is it good or bad?
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Good because:
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It provides opportunity
It provides return from ‘investment’
It helps us to be meticulous, alert and always
mindful when making decisions
Bad because:
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It is unpredictable
Leads to stress and anxiety
Chance of losing money
APT 2013
© 2009 Dr. Rafi/Dr. Ghazali
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8. Concept of risk
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Risk is a concept that denotes a potential
negative impact to an asset or some
characteristic of value that may arise from
some present process or future event.
In everyday usage, risk is often used
synonymously with the probability of a
known loss. Paradoxically, a probable loss
can be uncertain and relative in an
individual event while having a certainty in
the aggregate of multiple events.
APT 2013
© 2009 Dr. Rafi/Dr. Ghazali
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9. Risk vs. Uncertainty:
Some Definitions
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Webster's Dictionary:
– risk: "possibility of loss or injury; peril"
– uncertainty: "indefinite, indeterminate" and
"not known beyond a doubt."
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Frank H. Knight (1921):
– risk is present when future events occur with
measurable probability
– uncertainty is present when the likelihood of
future events is indefinite or incalculable
APT 2013
© 2009 Dr. Rafi/Dr. Ghazali
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10. Risk vs. Uncertainty: Some
Definitions (Risk)
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Risk is the possibility of suffering harm or loss;
danger.
Risk could be a factor, thing, element, or course
involving uncertain danger; a hazard.
Risk involves the expectation of loss. It is a
function of the probability and the consequences
of harm.
Risk is the possibility that returns from an
investment will be greater or less than forecast.
A state of uncertainty where some possible
outcomes have an undesired effect or significant
loss.
APT 2013
© 2009 Dr. Rafi/Dr. Ghazali
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11. Risk vs. Uncertainty: Some
Definitions (Uncertainty)
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Uncertainty is the condition of being uncertain;
doubt.
The lack of certainty, a state of having limited
knowledge where it is impossible to exactly
describe existing state or future outcome, more
than one possible outcome.
The state of mind of an individual who is unable
to make any estimate of future events.
State of knowledge in which one or more
alternatives result in a set of possible specific
outcomes, but where the probabilities of the
outcomes are neither known nor meaningful.
APT 2013
© 2009 Dr. Rafi/Dr. Ghazali
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12. Distinction between risk
and uncertainty
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Frank Knight (1921) established the important
distinction between risk and uncertainty as
follows:
"Uncertainty must be taken in a sense radically
distinct from the familiar notion of risk, from which it
has never been properly separated.... The essential
fact is that 'risk' means in some cases a quantity
susceptible of measurement, while at other times it is
something distinctly not of this character; and there
are far-reaching and crucial differences in the
bearings of the phenomena depending on which of
the two is really present and operating.... It will
appear that a measurable uncertainty, or 'risk' proper,
as we shall use the term, is so far different from an
unmeasurable one that it is not in effect an
uncertainty at all."
APT 2013
© 2009 Dr. Rafi/Dr. Ghazali
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13. Risk – Decision Making
Some points:
 Only risk-takers are truly free. All decisions of consequence involve risk.
 There is no such thing as permanent security.
 You are supposed to be afraid when you risk.
 Risking normally involves a degree of separation anxiety, the anxiety you
feel when you are removed from something that makes you feel secure.
Tackling risk in decision-making
 Decide whether the risk is necessary or desirable.
 Risk for the right reasons and when you are calm and thoughtful. Don’t take
a risk when you are emotional.
 Have a goal. Have clear purposes in mind.
 Determine the possible loss as well as the gain – know exactly what the
consequences of failure will be.
 Make an accurate estimate about the probability of each case.
 • When possible, take one risk at a time.

14. WISER DECISION MAKING
Here are eleven (11) basic steps to make wiser decisions.
 Define, as specifically as you can, the decision that needs to be
made.
 Write down as many alternatives as you can think of. Let your
imagination run free.
 See where more information about possible alternatives can be
found.
 Check out your alternatives. Find out more about the
 specifics of each option.
 Sort through all the alternatives. Evaluate them to see which one/s
work best for you.
 Visualize the outcome of each alternative.
 Do a reality check. Cross out those that are least likely to work.
 Which alternative “fits” best? Review the remaining ones and decide
which of them are most comfortable.
 Get started! Get moving once you have made your decision.
 Be sure to review your decision at specified points along the road.
Remember that you can always change your mind.

15. Characteristics of risk
and uncertainty
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Risk
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Measurable uncertainty
Quantifiable
Deliberate
Insurable (most of it)
Objective
Priori or statistical
probability (objective
probability)
APT 2013
Uncertainty
© 2009 Dr. Rafi/Dr. Ghazali
– Unmeasurable
uncertainty
– Unquantifiable
– Non deliberate
– Non insurable
– Subjective
– Non-symmetrical or
non-homogenous
probability (subjective
probability)
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16. Entrepreneurial risks
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Financial risks
Business and Operational risks
Product and Service liability
Career risks
Family and Social risks
Psychic and Health risks
Political and Governmental risks
Unpredictable and Uncontrollable risks
APT 2013
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17. Typology of entrepreneurial
risk styles
Level of personal financial risk
High
Level of profit motive
Low
Low
High
Risk avoiding
Activity seeking
Risk accepting
Activity seeking
Risk avoiding
Profit seeking
Risk accepting
Profit seeking
Source: Monroy & Folger (1993)
APT 2013
© 2009 Dr. Rafi/Dr. Ghazali
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18. Risk management
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Risk management is the process of
identifying risks in advance, assessing
their likely occurrence, and taking
steps to reduce or eliminate them
(mitigation)
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19. Risk
management
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Risk management involves identifying, analyzing,
and taking steps to reduce or eliminate the
exposures to loss faced by an organization. The
practice of risk management utilizes many tools
and techniques, including insurance, to manage
a wide variety of risks.
Every business encounters risks, some of which
are predictable and under management's control,
and others which are unpredictable and
uncontrollable.
APT 2013
© 2009 Dr. Rafi/Dr. Ghazali
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20. Risk management in
small business
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Risk management is particularly vital
for small businesses, since some
common types of losses—such as
theft, fire, flood, legal liability, injury,
or disability—can destroy in a few
minutes what may have taken an
entrepreneur years to build. Such
losses and liabilities can affect dayto-day operations, reduce profits, and
cause financial hardship severe
enough to cripple or bankrupt a small
business.
APT 2013
© 2009 Dr. Rafi/Dr. Ghazali
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21. Entrepreneurs’ risk
taking behavior
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Risk taking is a skill need to be
learned
Do not fear to take calculated or
moderate risks
Do not take risks unnecessarily
Perceive risk as opportunity
rather than as threat
Perceive risk as challenge that
triggers them to behave
entrepreneurially
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© 2009 Dr. Rafi/Dr. Ghazali
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22. Enterprise Resourcing
Skills

23. Types of Resources
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Manpower
Material
Financial(Money)
Technological(Machine)
Business Premise/Physical
Information
Reputation
Networks
Organizational resources – structure, systems and
business models
APT 2013
© 2009 Dr. Rafi/Dr. Ghazali
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24. Strategic vs. Common
Resources
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Strategic resources refer to
resources which provide a
sustained competitive
advantage to a firm
Common resources are
necessary for carrying out the
firm’s usual activities but
provide no specific advantage
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© 2009 Dr. Rafi/Dr. Ghazali
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25. Attributes of Strategic
Resources
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Valuable
Rare
Non-substitutable
Hard to copy
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26. Key Factors to Consider
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Essentiality (critical or noncritical)
Availability of supply
Cost
Strategic/competitive
advantage
Statutory/Legal requirements
Quality vs. quantity
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© 2009 Dr. Rafi/Dr. Ghazali
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27. Resource Management
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Objectives:
– To ensure any resources needed by
the business is available at the time,
quantity and specification (optimality)
eg. Just in Time (JIT)
– To avoid unnecessary waste or
purchase of resources
eg. Material Requirement Planning
– To ensure smooth operation of the
business
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28. Creativity and Innovation
in Resource
Management
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Creative and innovative
in acquiring resources
– Cheap, reusable, multipurpose, recyclable
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Creative and innovative
in managing resources
– Efficient, reduce waste,
generate revenue
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