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evie
13/12/2025
Business
Business Risk and Reward
199
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13 Dec 2025
•
Understanding Business Risks and Rewards with Examples
evie
@e777
1 / 6
Risk and Reward Basics
Starting a business is like placing a bet on yourself - there's always a chance things could go brilliantly or terribly wrong. Risk is calculated by looking at how likely something bad might happen and how serious the consequences would be.
Every business faces unknown factors that could affect success. That's why entrepreneurs need to weigh up potential problems against possible benefits before diving in. The key is understanding that higher risks often come with the possibility of greater rewards.
Quick Tip: Think of risk as "probability × impact" - a small chance of a huge loss might be riskier than a big chance of a small problem.
The Dark Side: Business Risks
Business failure is the biggest fear for any entrepreneur. Poor cash flow, falling sales, or aggressive competitors can sink even promising ventures. Many businesses don't survive their first year.
Financial loss hits hard because owners often invest their own money. With unlimited liability businesses, you could even lose personal belongings like your house if things go wrong. That's a genuinely scary prospect.
Lack of security means no guaranteed monthly salary, no sick pay, and no paid holidays. Unlike employees who get regular paycheques, business owners only earn money when their business makes profit.
Reality Check: About 20% of new businesses fail within their first year - but that means 80% don't!
The Bright Side: Business Rewards
Business success brings incredible personal satisfaction. Building something from scratch, creating excellent products, and earning recognition feels amazing. Some entrepreneurs even win prestigious business awards.
Profit is the financial reward when your revenue exceeds costs. Unlike a fixed salary, there's no ceiling on how much you can earn if your business takes off.
Independence is often the biggest draw for entrepreneurs. Being your own boss means making all the decisions, setting your own hours, and running things exactly how you want. No more annoying managers or boring meetings you didn't choose to attend.
Fun Fact: Many successful entrepreneurs say the freedom is worth more than the money they could earn working for someone else.
Smart Risk Management
You can't eliminate risk completely, but you can definitely reduce it. Market research helps you understand your customers and competitors before investing serious money. Business plans force you to think through potential problems and solutions.
Making sure your business stays competitive and raising sufficient startup finance are equally crucial. Running out of money is one of the main reasons new businesses fail.
Some businesses are naturally riskier than others. Seasonal demand (like ice cream shops), small markets, highly competitive industries, or inexperienced owners all increase the danger level. Understanding these factors helps you make smarter choices.
Pro Tip: The best entrepreneurs don't avoid risk - they manage it intelligently.
Exam Practice: Identifying Risks
This exam question tests whether you can spot genuine business risks. The correct answer is B - negative cash flow represents a real threat to business survival.
Options A and C describe positive scenarios (rising demand, falling costs). Option D mentions extra work hours, which might be personally inconvenient but doesn't threaten the business itself.
When tackling similar questions, always focus on factors that could lead to business failure rather than personal inconveniences for the owner.
Exam Strategy: Look for financial problems, falling demand, or competitive threats when identifying business risks.
Exam Practice: Explaining Motivations
This question requires you to explain entrepreneurial motivations clearly. The model answer focuses on decision-making autonomy and links it to personal satisfaction - showing cause and effect.
Notice how the response doesn't just list a reason but explains why it matters to the individual. This demonstrates the deeper understanding that exam markers look for in three-mark questions.
Other strong answers might focus on profit potential, independence from bosses, or the satisfaction of building something from scratch.
Exam Tip: Always explain the "so what?" - don't just state a fact, explain why it motivates people to start businesses.
We thought you’d never ask...
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Where can I download the Knowunity app?
You can download the app from Google Play Store and Apple App Store.
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4.9/5
App Store
4.8/5
Google Play
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
Best app on earth! no words because it’s too good
Thomas R
iOS user
Just amazing. Let's me revise 10x better, this app is a quick 10/10. I highly recommend it to anyone. I can watch and search for notes. I can save them in the subject folder. I can revise it any time when I come back. If you haven't tried this app, you're really missing out.
Basil
Android user
This app has made me feel so much more confident in my exam prep, not only through boosting my own self confidence through the features that allow you to connect with others and feel less alone, but also through the way the app itself is centred around making you feel better. It is easy to navigate, fun to use, and helpful to anyone struggling in absolutely any way.
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
very reliable app to help and grow your ideas of Maths, English and other related topics in your works. please use this app if your struggling in areas, this app is key for that. wish I'd of done a review before. and it's also free so don't worry about that.
Rohan U
Android user
I know a lot of apps use fake accounts to boost their reviews but this app deserves it all. Originally I was getting 4 in my English exams and this time I got a grade 7. I didn’t even know about this app three days until the exam and it has helped A LOT. Please actually trust me and use it as I’m sure you too will see developments.
Xander S
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This apps acc the goat. I find revision so boring but this app makes it so easy to organize it all and then you can ask the freeeee ai to test yourself so good and you can easily upload your own stuff. highly recommend as someone taking mocks now
Paul T
iOS user
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
Best app on earth! no words because it’s too good
Thomas R
iOS user
Just amazing. Let's me revise 10x better, this app is a quick 10/10. I highly recommend it to anyone. I can watch and search for notes. I can save them in the subject folder. I can revise it any time when I come back. If you haven't tried this app, you're really missing out.
Basil
Android user
This app has made me feel so much more confident in my exam prep, not only through boosting my own self confidence through the features that allow you to connect with others and feel less alone, but also through the way the app itself is centred around making you feel better. It is easy to navigate, fun to use, and helpful to anyone struggling in absolutely any way.
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
very reliable app to help and grow your ideas of Maths, English and other related topics in your works. please use this app if your struggling in areas, this app is key for that. wish I'd of done a review before. and it's also free so don't worry about that.
Rohan U
Android user
I know a lot of apps use fake accounts to boost their reviews but this app deserves it all. Originally I was getting 4 in my English exams and this time I got a grade 7. I didn’t even know about this app three days until the exam and it has helped A LOT. Please actually trust me and use it as I’m sure you too will see developments.
Xander S
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This apps acc the goat. I find revision so boring but this app makes it so easy to organize it all and then you can ask the freeeee ai to test yourself so good and you can easily upload your own stuff. highly recommend as someone taking mocks now
Paul T
iOS user
Understanding Business Risks and Rewards with Examples
evie
@e777
Ever wondered why some people risk everything to start their own business? Understanding the balance between risk and reward is crucial for anyone thinking about entrepreneurship - and it's a key topic you'll need to master for your business studies... Show more
Risk and Reward Basics
Starting a business is like placing a bet on yourself - there's always a chance things could go brilliantly or terribly wrong. Risk is calculated by looking at how likely something bad might happen and how serious the consequences would be.
Every business faces unknown factors that could affect success. That's why entrepreneurs need to weigh up potential problems against possible benefits before diving in. The key is understanding that higher risks often come with the possibility of greater rewards.
Quick Tip: Think of risk as "probability × impact" - a small chance of a huge loss might be riskier than a big chance of a small problem.
Sign up to see the contentIt's free!
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
The Dark Side: Business Risks
Business failure is the biggest fear for any entrepreneur. Poor cash flow, falling sales, or aggressive competitors can sink even promising ventures. Many businesses don't survive their first year.
Financial loss hits hard because owners often invest their own money. With unlimited liability businesses, you could even lose personal belongings like your house if things go wrong. That's a genuinely scary prospect.
Lack of security means no guaranteed monthly salary, no sick pay, and no paid holidays. Unlike employees who get regular paycheques, business owners only earn money when their business makes profit.
Reality Check: About 20% of new businesses fail within their first year - but that means 80% don't!
Sign up to see the contentIt's free!
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
The Bright Side: Business Rewards
Business success brings incredible personal satisfaction. Building something from scratch, creating excellent products, and earning recognition feels amazing. Some entrepreneurs even win prestigious business awards.
Profit is the financial reward when your revenue exceeds costs. Unlike a fixed salary, there's no ceiling on how much you can earn if your business takes off.
Independence is often the biggest draw for entrepreneurs. Being your own boss means making all the decisions, setting your own hours, and running things exactly how you want. No more annoying managers or boring meetings you didn't choose to attend.
Fun Fact: Many successful entrepreneurs say the freedom is worth more than the money they could earn working for someone else.
Sign up to see the contentIt's free!
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
Smart Risk Management
You can't eliminate risk completely, but you can definitely reduce it. Market research helps you understand your customers and competitors before investing serious money. Business plans force you to think through potential problems and solutions.
Making sure your business stays competitive and raising sufficient startup finance are equally crucial. Running out of money is one of the main reasons new businesses fail.
Some businesses are naturally riskier than others. Seasonal demand (like ice cream shops), small markets, highly competitive industries, or inexperienced owners all increase the danger level. Understanding these factors helps you make smarter choices.
Pro Tip: The best entrepreneurs don't avoid risk - they manage it intelligently.
Sign up to see the contentIt's free!
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
Exam Practice: Identifying Risks
This exam question tests whether you can spot genuine business risks. The correct answer is B - negative cash flow represents a real threat to business survival.
Options A and C describe positive scenarios (rising demand, falling costs). Option D mentions extra work hours, which might be personally inconvenient but doesn't threaten the business itself.
When tackling similar questions, always focus on factors that could lead to business failure rather than personal inconveniences for the owner.
Exam Strategy: Look for financial problems, falling demand, or competitive threats when identifying business risks.
Sign up to see the contentIt's free!
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
Exam Practice: Explaining Motivations
This question requires you to explain entrepreneurial motivations clearly. The model answer focuses on decision-making autonomy and links it to personal satisfaction - showing cause and effect.
Notice how the response doesn't just list a reason but explains why it matters to the individual. This demonstrates the deeper understanding that exam markers look for in three-mark questions.
Other strong answers might focus on profit potential, independence from bosses, or the satisfaction of building something from scratch.
Exam Tip: Always explain the "so what?" - don't just state a fact, explain why it motivates people to start businesses.
We thought you’d never ask...
What is the Knowunity AI companion?
Our AI Companion is a student-focused AI tool that offers more than just answers. Built on millions of Knowunity resources, it provides relevant information, personalised study plans, quizzes, and content directly in the chat, adapting to your individual learning journey.
Where can I download the Knowunity app?
You can download the app from Google Play Store and Apple App Store.
Is Knowunity really free of charge?
That's right! Enjoy free access to study content, connect with fellow students, and get instant help – all at your fingertips.
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Most popular content: Entrepreneurship
Most popular content in Business
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Can't find what you're looking for? Explore other subjects.
Students love us — and so will you.
4.9/5
App Store
4.8/5
Google Play
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
Best app on earth! no words because it’s too good
Thomas R
iOS user
Just amazing. Let's me revise 10x better, this app is a quick 10/10. I highly recommend it to anyone. I can watch and search for notes. I can save them in the subject folder. I can revise it any time when I come back. If you haven't tried this app, you're really missing out.
Basil
Android user
This app has made me feel so much more confident in my exam prep, not only through boosting my own self confidence through the features that allow you to connect with others and feel less alone, but also through the way the app itself is centred around making you feel better. It is easy to navigate, fun to use, and helpful to anyone struggling in absolutely any way.
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
very reliable app to help and grow your ideas of Maths, English and other related topics in your works. please use this app if your struggling in areas, this app is key for that. wish I'd of done a review before. and it's also free so don't worry about that.
Rohan U
Android user
I know a lot of apps use fake accounts to boost their reviews but this app deserves it all. Originally I was getting 4 in my English exams and this time I got a grade 7. I didn’t even know about this app three days until the exam and it has helped A LOT. Please actually trust me and use it as I’m sure you too will see developments.
Xander S
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This apps acc the goat. I find revision so boring but this app makes it so easy to organize it all and then you can ask the freeeee ai to test yourself so good and you can easily upload your own stuff. highly recommend as someone taking mocks now
Paul T
iOS user
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
Best app on earth! no words because it’s too good
Thomas R
iOS user
Just amazing. Let's me revise 10x better, this app is a quick 10/10. I highly recommend it to anyone. I can watch and search for notes. I can save them in the subject folder. I can revise it any time when I come back. If you haven't tried this app, you're really missing out.
Basil
Android user
This app has made me feel so much more confident in my exam prep, not only through boosting my own self confidence through the features that allow you to connect with others and feel less alone, but also through the way the app itself is centred around making you feel better. It is easy to navigate, fun to use, and helpful to anyone struggling in absolutely any way.
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
very reliable app to help and grow your ideas of Maths, English and other related topics in your works. please use this app if your struggling in areas, this app is key for that. wish I'd of done a review before. and it's also free so don't worry about that.
Rohan U
Android user
I know a lot of apps use fake accounts to boost their reviews but this app deserves it all. Originally I was getting 4 in my English exams and this time I got a grade 7. I didn’t even know about this app three days until the exam and it has helped A LOT. Please actually trust me and use it as I’m sure you too will see developments.
Xander S
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This apps acc the goat. I find revision so boring but this app makes it so easy to organize it all and then you can ask the freeeee ai to test yourself so good and you can easily upload your own stuff. highly recommend as someone taking mocks now
Paul T
iOS user