Reduce Risk By Seeming Risky Essay

644 words - 3 pages

Risk is a four-letter word. Manage risk well and you can make a fortune. Manage risk poorly and you could lose a colossal fortune.

A few daredevils like risk and cannot live without it. They careen from risk to risk. Ask Eike Battista, one of Brazil’s most dynamic entrepreneurs. Battista managed to build one of the world’s great fortunes, and then lost most of it. He knew when to take risks. But he obviously did not reduce them. Most do not like risk since they see the loss more clearly than they see the gain.

My father was an actuary (an insurance expert who specializes in risk), and one of my first lessons about money was that risk is not inherently good or bad – you just have to manage it or you will pay the price. If you are asked to assume risk, the one doing the asking needs to pay you. And you should be sure that you are not wiped out by the event happening – unless, of course, you cannot live without such ...view middle of the document...

So you can bet on anything – just know the odds of success and failure.
VCs manage risk by investing:
Mainly in Silicon Valley (because that’s where the home runs have been)
Mainly in later stages after the major risk has been reduced
By controlling the venture and replacing the founder entrepreneurs (you) with an experienced executive. They did this with Steve Jobs also – you know how that turned out.
Bankers cut risk by seeking an alternate form of repayment, i.e. collateral. They need this in case the primary form, cash flow, fails to work as planned.
Executives cut risk by avoiding high-risk, revolutionary changes. Instead they focus on minor, evolutionary enhancements. This is wise in the short term when revolutionary changes may not be around to destroy their cozy industry. In the long term, revolutionary changes may undercut their basic business. Those who do not adapt, die. Executives hope that this doesn’t happen on their watch.
Entrepreneurs cannot diversify. They don’t have the resources in time or capacity or money. Entrepreneurs cannot measure risk because they are measuring themselves and their own capacity. The entrepreneur’s key strength is focus. Lose this and the odds are that you will fail. Entrepreneurs cannot charge anyone else to take the risk. They need to get in during the early stage when the risk is high. They have to give collateral to the bankers to reduce the financiers’ risk. They need to push the venture forward until take off and the VCs see value.

What entrepreneurs need to learn is to cut risk until take off. To do this, they need to know capital efficiency.

MY TAKE: Entrepreneurs can reduce risk while still shooting for profits by adjusting to the times and serve changing needs and new markets better than their competitors. That’s how entrepreneurs (and executives) reduce risk. This is what Steve Jobs did – and he did it brilliantly. This means that you need to know the trends – in your products, technology, markets, industry, and in the factors that influence these such as the government and the environment. Then you need to imitate and improve.

Other assignments on Reduce Risk By Seeming Risky

Marriott Essay

895 words - 4 pages 1. Project Chariot involves a conflict of interests. Describe this conflict, who it is between, and who stand to gain or lose from this project. The conflict of interest exists between the shareholders and the bondholders. After Project Chariot is implemented, MII will be of low debt level and HMC will be with high debt. The original bondholders will be tied to risky real estate assets with uncertain appreciation and expected income

Gb550 Unit 4 Assignment

362 words - 2 pages relative risk as compared with those of other stocks. This graph shows that stock Y’s volatility follows the basic trend of the market (NYSE). The regression line and beta coefficient shows a positive correlation between stock Y and the market with an upward trending regression line and positive beta coefficient of 0.62. Also, the plots of stock Y lie closer to the regression line than the market leading to believe that stock Y is less risky than the other stocks in the market.   c. Suppose the regression lines were exactly as shown by your graph from part b but the scatter of points were more spread out. How would this

Managing Projects

576 words - 3 pages will need to collectively address and acknowledge by all the project stakeholders to the project all exist in an climate of change-and change brings with it one constant :risk. The goal of risk management is to ensure that a suitable risk response mechanism is put in place to reduce the resulting consequences in the project. 2. Standard Used for Risk Management Process. Standard "AS/NZS ISO 31000:2009 is used for this proposed project to

Finance

2359 words - 10 pages % Starbucks Corporation. By investing in this portfolio the couple will reduce their portfolio risk from 36.58% recorded on the equally weighted portfolio but the portfolio mean return will also decrease from 31.02% per year to 10% per year which is higher than the benchmark portfolio which recorded a mean return per year of 1.57% and the standard deviation will also be lower than the benchmark portfolio which recorded a standard deviation of 24.69

New Heritage Doll Compnay

1183 words - 5 pages -3,026 9 1,256 -1,663 10 2,114 -219 Exhibit 2 Risk Analysis: MMDC is clearly a less risky project. The first component to look at is the discount rate, which is .06 less for MMDC than that of DYOD. In addition to having a lower discount rate, MMDC’s NPV decreases at a slower rate relative to an increase in the discount rate than DYOD. For example, if we raise both interest rates by 1/8 of their original rate, the NPV for DYOD drops from $7,118,000 to

Teen Sex

1861 words - 8 pages cure for HIV. Teens’ belief that they are invincible, combined with their misconceptions about oral sex, puts them at risk for undetected STDs. Once STDs are detected, the consequences shift from the teens to include everyone involved in their lives. Families, schools and communities are all affected by the consequences of teen sex. Most parents do not believe that their teen is having sex, certainly not oral sex. Parents have to

Human Protection

2629 words - 11 pages “estimates 1,148,200 people aged 13 years and older are living with HIV infection, including the 207,600 (18.1%) who are unaware of their infection” (U.S. Centers for Disease Control and Prevention, 2013, para. 5). HIV is more prevalent in metropolitan areas, age groups 20-24 and 25-29 and high risk groups like men who have sex with men (MSM) of all races and ethnicities. By race/ethnicity, African Americans bear the most burden of HIV. While

Violence

1248 words - 5 pages relationship flanked by real violence and aggression (Merino 2011). As the research has not yet provided credible and reliable information regarding the violent behavior of the youth, there is need for further work in similar areas of prevention and interventions for young adults exposed to violence in order to reduce the negative outcomes. Risky Behaviors Other reasons as to why young people are more violent can be related to influence from peer

International Portfolio Investment And International Diversification- Benefits And Limits

5036 words - 21 pages investor to have a small cushion of protection against losses due to an UK economic downturn. To sum up, we can see more and more needs from investor to invest in international markets. International diversification is the attempt to reduce risk by investing in more than one nation. By diversifying across nations whose economic cycles are not perfectly correlated, investors can typically reduce the variability of their returns. Although this type

Hiv Epidemiology Paper

1421 words - 6 pages risk for the contraction of HIV/AIDS. These places mostly include those of poverty. This organization is responsible for acts such as condom distribution, which helps in the reduction of the pandemic (whitehouse.gov). Overall, though we have yet to find a cure, there is something that everyone can do that can help reduce those affected by HIV/AIDS. Everyone can commit to being tested at a free clinic every year if they are not in a monogamous

Winton Carter Mining - The Risks Of Engaging A Mining

1264 words - 6 pages industry in terms of management and production for short-term and long-term gain. By engaging in the project, WCM will improve its reputation, increase its goodwill because of a likely increase in its share price, and potentially establish a new considerable source of income. The risks, however, are substantial. Firstly, security risk that is considered high due to social instability of African countries may reduce the site’s revenue considerably

Similar Documents

Risk And Return Essay

449 words - 2 pages Mean (GM) = π(1+HPR) )^(1/N)-1 Better measure of past performance GM < AM Sharpe Ratio Sharpe Ratio for Portfolios =(Excess Return)/(SD of Excess Return)=(R_i-R_f)/(σ(R_i-R_f)) Measure the attraction of an investment portfolio by comparing its reward (risk premium) and risk (SD) Excess return per unit of risk Reward-to-variability (volatility) ratio Historical Returns on Risky Portfolios Asset classes that provide higher return

Foreign Market Entry Essay

456 words - 2 pages –  Takes a long time 9 Pros and Cons of Green-field Ventures •  Pro –  Flexibility to build the kind of subsidiary a firm wants •  Cons –  Slow to establish –  Risky –  Possibility of being preempted by more aggressive global competitors, who enter via acquisitions 10 Cross-Border Mergers & Acquisitions •  Pros –  Quick to execute –  Preempt competitors –  Less risky than green-field development •  Cons

Eco 550 Essay

625 words - 3 pages bonus based on surpassing the performance of comparable firms over several years. When all of the compensation is cash, managers wish to start only low risk projects to avoid making any mistakes and stay away from higher risk, potentially high-valued projects. Question 3 If Corporate profitability was to decline by 20 percent from 2008 to 2009. The shareholder wealth is used as an indicator to check whether it is increased or not. When the

Flash Technologies Essay

259 words - 2 pages unrecorded. | Accounts payable being understated due to unforeseen costs:             Completeness             Accuracy             Valuation | Unforeseen Costs and expenses: Put greater emphasis on going through documents like bill of ladings and vendor invoices to ensure all the costs are being correctly recorded. If possible, use a larger sample size to reduce sampling risk and to ensure a greater chance of catching unrecorded costs | | Risky acquisition like DCI, which has history of income losses. | Overstatement of sales through fictitious transactions | Sales from fictitious...