ENTRECOMP IMPLEMENTATION - The Entrepreneurship Competence Framework Implementation

3.3 Coping with uncertainty, ambiguity & risk


COU_6_EN  

 Title
3.3 Coping with uncertainty, ambiguity & risk

 Keywords
• Uncertainty •Ambiguity • Risk

 Author
DELTA

 Languages
English

 Objectives/goals
• The training participant will learn what is the meaning of the distinction in uncertainty, ambiguity & risk in business • The participant will be able to verify his business with uncertainty, ambiguity & risk • The participant will be aware that each business is associated with uncertainty and risk not only in its creation and operation


 Contents

 Coping with uncertainty, ambiguity and risk

A Introduction and basics


   What do we mean with risk?

Uncertainty, ambiguity and risk in business are the basic barriers or challanges to the development of any enterprise or business. The ability to deal with it is crucial for business development, increasing profits and in many cases also survival in the market.

 

At the stage of establishing the enterprise, a SWOT analysis (strengths and weaknesses, opportunities and threats) is created. Once the business is up and running, dealing with incompetence, ambiguity and risk is a key part of management.


  Seeking definitions

•Uuncertainty (in Business) a situation, in which the probability distribution is unknown (i.e. something that can be understood in more than one way or can have more than one outcome)

 

•Risk refers to the probability or threat of loss, liability, injury, damage, or any other negative occurrence resulting from external or internal vulnerabilities, and that may be prevented or avoided through preventive action
 


  To resume

In order to obtain the full picture of uncertainty and ambiguity, we can make a comparison with understanding certainty:


  Obstacles in doing business pt.1

Barriers in doing business

Barriers to entry is an economics and business term describing factors that can prevent or impede newcomers into a market or industry sector, and so limit   competition. These can include high start-up costs, regulatory hurdles, or other obstacles that prevent new competitors from easily entering a business sector


  Obstacles in doing business pt.2



  Obstacles in doing business pt.3

A SWOT Analysis perspective

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. It is a technique for assessing these four aspects of your business.

Conducting a SWOT analysis is a powerful way to evaluate your company or project.

The primary objective of a SWOT analysis is to help organizations develop a full awareness of all the factors involved in making a business decision.

 


The decision-making process


  Effective decision making

Decision making is a vital component of small business success.

Decisions based on a foundation of knowledge and sound reasoning can lead the company into long-term prosperity; conversely, decisions made on the basis of flawed logic, emotionalism, or incomplete information can quickly put a small business out of commission.

 


  7 Characteristics of a Good Decision

1.An appropriate decision frame
2.Clear values to adhere to and objectives you are trying to accomplish
3.Creative alternatives to choose from
4.Good information
5.Clear tradeoffs and sound reasoning
6.Choice alignment with values and objectives
7.Committed implementation


  7 Ways to deal with uncertainty

1.Replace expectations with plans
2.Prepare for different possibilities
3.Become a feeling observer
4.Get confident about your coping and adapting skills
5.Utilize stress reduction techniques pre-emptively
6.Focus on what you can control
7.Practice mindfulness

 

According to Lori Deschene


  Moreover

Uncertainty is the only certainty there is, and knowing how to live with insecurity is the only security

 

John Allen Paulos


  The words of the experts

Below are three examples of authors who point out mistakes made when making decisions. On this basis, try to compile your list of mistakes made when making decisions

 


  The power of trust

Trust  is  the  foundation  and  stimulus  for  every  activity  in  the organization,  it  gives  a  sense  of  security  and  allows  you  to  quickly  react  to  changes in the environment.

 

There are eight Pillars of Trust (according to Business strategist David Horsager):

•Clarity – People trust the clear and mistrust the ambiguous
•Compassion – People put faith in those who care beyond themselves
•Character – People notice those who do what is right over what is easy
•Competency – People have confidence in those who stay fresh, relevant, and capable
•Commitment – People believe in those who stand through adversity
•Connection – People want to follow, buy from, and be around friends
•Contribution – People immediately respond to results
•Consistency – People love to see the little things done consistently


  How uncertainty works

At TEDxCanberra 2012, Nobel Prize for Physics recipient, Professor Brian Schmidt, provides a live, engaging and practical demonstration of just how uncertainty works in the real world (click the image for the video)

 


Risk in Business


   Internal VS External risk

Business risks refers to the possibility of a commercial business making inadequate profits (or even losses) due to uncertainties.

 

Business risks can arise due to the influence by two major risks: internal risks (risks arising from the events taking place within the organization) and external risks (risks arising from the events taking place outside the organization).


  Internal VS External risk: examples



  What is Risk Management?

Risk management helps you make better business decisions. It involves reducing the things that could have a negative effect on your business.

For example, the reducing the risk of injury by through safety procedures.


  How you can manage risk?

Before you decide what to do, you’ll need to work out what your risks are and which ones are most urgent


  How the best do it...

•Jeff Bezos. If you choose to only do things that you know will work, you will leave many options on the table
•Richard Branson. You can be careful and try to avoid risks, but you can't protect yourself all the time
•Walt Disney. In my opinion, courage is the main quality of leadership. Usually it involves risk taking, especially in new ventures
•Mark Zuckerberg. The biggest risk is not taking any risks. In a rapidly changing world, the strategy that guarantees failure is not taking risks

 

•Henry Ford. No one can really guarantee the future. The best we can do is increase the chances, calculate the risks involved, assess our ability to deal with them, and execute our plans safely


  ...and the implication for business:

In short:

 


  Suggestions for self-study

In this video, Andy Penaluna, Director of the International Institute for Creative Entrepreneurial Development (http://www.uwtsd.ac.uk/iiced) at the University of Wales Trinity Saint David, explains that students can be exposed to uncertain, ambiguous activities where things change, deadlines shifts and there are no clear instructions on what shall be done next. Being exposed to such situations allows them to develop strategies to cope and learn to flexibly adapt to changing environments.

 


  To recap:

•Every business is associated with uncertainty, ambiguity & risk
•Be guided by your reason, experience, and intuition in making binding decisions
•You will never avoid situations in which you will make important decisions
•You can always consult someone, discuss the matter in the team, try to thoroughly investigate a given situation
 
 

 

•Everyone makes mistakes and you can make them


  To recap: Checklist for self-check

 
 Bibliography



 Training Fiche PPT:
COU_3_en3.3 Coping with risk (DELTA).pptx

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