Business and Enterprise is about taking risks

1. ENTERPRISE YEAR 11: WEEK 2 Business and Enterprise is about taking risks It is also about managing the risks you take. RISK MANAGEMENT Making the ‘right’ decisions for the ‘right’ reasons

2. BUSINESS OPPORTUNITIES AND RISKS Risk Assessment SKILLS AND KEYWORDS Skills – Analysis and critical evaluation, decision-making. Keywords – risk-taking, investment, return on investment (ROI), PESTEL (an acronym for political, economic, social, technological, environmental and legal risks). • Objective: At he end of the lesson: • All learners will be able to understand that risks exist in enterprise activities. • All learners will be able to complete a risk assessment template of their enterprise activity. • Most learners will be able to explain the reasons why enterprises and entrepreneurs take and accept risks. • Some learners will be able to explain how they expect to deal with the most significant risks for their own enterprise activity.

3. DO NOW: Taking a risk Match the event to the odds of it happening • Event • Winning national lottery • Chance of you becoming a millionaire • Chance of a new restaurant failing in three years • Chance of being struck by lightening • Chance of being killed on the road • Chance of winning £1m on premium bonds • Odds • 1 in 3 • 1 in 600,000 • 1 in 14m • 1 in 24bn • 1 in 17,000 • 1 in 141 Can you justify your choice?

4. Match the event to the odds of it happening: How did you get on? Event • Winning national lottery • Chance of you becoming a millionaire • Chance of a new restaurant failing in three years • Chance of being struck by lightening • Chance of being killed on the road • Chance of winning £1m on premium bonds Odds 1 in 3 1 in 600,000 1 in 14m 1 in 24bn 1 in 17,000 1 in 141

5. STARTER ACTIVITY • What do you understand by ‘risk taking’? Discuss how the entrepreneur you researched exhibited risk-taking characteristics.

6. MAIN TEACHING ACTIVITY Teacher activity Teacher Activity RISK TAKING demonstrating a ‘can do’ attitude TAKING CALCULATED RISK – (risk management) Making the ‘right’ decisions for the ‘right’ reasons An entrepreneur takes calculated risk – some forms of risk assessment is done. Risk assessment needs to be diversified by looking at P.E.S.T.E.L. RISK TAKERSir Richard Branson, probably everyone's favourite entrepreneur, started his first business at the age of 16 while still at school publishing ‘Student magazine’. Branson is always taking risks, piloting balloons and power boats across the Atlantic. He failed on the first attempt in both cases but did not give up and succeeded on the second occasion. He has since added a huge number of businesses to his portfolio and made billions of pounds including Virgin Atlantic, Virgin Trains and Virgin Mobile.

7. Learner Activity What does the acronym P.E.S.T.E.L stand for? Read the extract information about the following and suggest how they might have undertaken risks. Sir Alan Sugar started selling car aerials in the east end of London immediately after leaving school. He founded Amstrad in 1968 to make electronic devices for the home including computers and home sound systems. From starting with virtually nothing he amassed a fortune of more than £700m and he would put this all down to being enterprising.

8. Learner Activity contd. • Suggest to someone some significant risks that you have undertaken over the past one year. Describe what you did to reduce the risks. Activity/Exercise You are about to open a restaurant: For the following investments explain giving clear examples how you will reduce your risk of failure in your enterprising venture. • A Market Research Study Redecoration of dining room • Location A competitor • Lots of staff • Live music • Radio advertising • Discount vouchers

9. PLENARY • Risk taking is therefore about … Discuss with someone what you have learnt in this lesson. Also how is the lesson relevant to your Coursework project? DETERMINATION PERSISTENCE SELF BELIEF Risk management is about… PLANNING ADAPTABILITY CONFIDENCE

10. HOMEWORK Analyse the risk of investing £100 on each of the following. Discuss how the risks identified could be reduced. (i) Deposit account with a bank (ii) Money invested in property (iii) Money invested in stock market (iv) Money invested in your Tuck Shop business (v) Money invested in lottery tickets (vi) Money invested in premium bonds (vii) Money invested in pension fund

11. Success Criteria for Homework Identification of one potential risks for each statement – 1 mark Explanation – 1 mark Sound discussion of how to reduce risk – 2 marks each Limited discussion – 1 mark Total maximum mark – 28 marks Due date – 22nd September, 2014. Enquiries: onyeka_madu5@yahoo.com

12. NOTES P.E.S.T.E.L ANALYSIS • P = Political E = Economic • S = Social • T = Technological • E = Environmental • L = Legal. • Entrepreneurs accept and take calculated risks. Dealing with risks involves first identifying the risks and then choosing which risks are to be dealt with (or worth dealing with). Although it is not often possible to deal with all potential risks, it is important to identify those risks which would have significant impact on the business organisation to take care of. • PESTEL analysis is an analysis of outside (external) influences that may have an impact on an organisation. It represents the evaluation of the external factors which need to consider when making any strategic decision. By using the PESTEL framework we can analyse the many different external factors that may impact on a business and implications of these factors for the business either in the short or long term.

13. Explanation of factors • Political Factors • These look at government’s involvement in business operations either through laws and regulations (policies); e.g. tax changes, provision of merit and public goods, provision of infrastructure, subsidies, new legislations etc. • Economic Factors • Businesses are always interested in the economy because if it is healthy, people will be more likely to invest in products and markets. Economic issues like rising costs, unemployment rate, exchange rate fluctuations etc may have major impact on business organisations and may need to be considered as risk factors. • Social factors • Changes in socio-cultural trends such as attitudes, lifestyles, opinions, age, occupation etc can impact on the demand for a business’s products. It can also impact on the availability and willingness of individuals to work. • Technological factors • Changing technology may be a threat for one industry, but an opportunity for others. New technologies create new products and new processes open up new market opportunities for businesses. MP3 players, computer games and high definition TVs are all new markets created by technological advances. Online shopping, bar coding and computer aided designs are all improvements to the way we do business as a result of better technology. Although technology can reduce costs, improve quality and lead to innovation, these could be threats to businesses as well.

14. Explanation Contd. • Environmental factors • Environmental factors include the weather and climate change and other environmental issues like global warming. Changes in temperature can impact on many industries including farming, tourism and insurance. For example, the general move towards environmental friendly products is affecting demands and creating business opportunities for LCD/LED screens instead of CRT screens. • Legal factors • These are related to the legal environment in which businesses operate. Many significant legal changes can affect business behaviour. For example, an increase in the minimum wage, requirement that producing businesses buy recycling plants to recycle their waste, etc can affect the businesses’ costs which will have an impact on their prices and demand for their products. • Other legal issues may involve consumer protection laws, competition laws, employment laws, and health and safety laws.