Understanding the Terminal life of Risk in Business

Without the risk factor, entrepreneurship would have been an easy walk in game for anyone willing or contemplating to play. As we know, there is always two sides to a coin, what often makes the flip-side of the coin in life – business or ventures – is risk. In most business circles, it is held and generally thought that the higher the risk, the higher the yield however, this is not always so when examined practically. Yield, on one hand, is simply defined as the annual rate of return on an investment, expressed as a percentage.

It is too delicate or in fact too risky to go into business pregnant with risk and expecting to have a safe delivery. It is like walking on a thin rope place across a river or some incredible heights and expecting not to trip or fall along the line. Truly, we can say it is possible for a few persons have done it but what about the majority of people who can’t afford to toll on such ventures especially considering that these few persons who have done so have a few secrets- backings- best know to them which makes them dare such ventures.

Most people would have gone into business or make some business decisions if they knew the best way or secrets into business without biting their fingers as there are quite a number of ways to handle however technical or basic. Risk can be abated, prevented, minimised, avoided, coped- with or accommodated to the advantage of the taker. Technically or scholastically, several ways are thought on how risk can be best handled. Risk could be transferred, shared, monitored especially through prioritising, insurance and others.

This article will in furtherance throw some new light on how risk can be handled at the conception and inception level of business. It examines the capacity in which a potential entrepreneur can strategically buy off risk or pay risk off. The illustrations below will best drive home the understanding of this method.

In a scenario where Mr. A builds a commercial property in an eyebrow location and Mr. B is the renter of such property. Mr B runs his business, however viable, in the property but he will always live his business life first to pay Mr. A’s rent before he even considers himself. Failing to do this automatically means that Mr. B may be thrown out of property as other willing renters are knocking on the door for what so ever business they deem fit for the occupation of the property. In the event where Mr. B leaves because of deficit of rent payment and Mr. C takes over; Mr. C may as well have to live his business life to pay Mr. A’s rent first before any other commitment is made as Mr. A’s rent is the primary commitment of Mr. C while other commitments are secondary.

Thus, what has afforded Mr. A an almost certain fixed income generation over Mr. B or Mr. C is his understanding that you can actually create a terminal life for risk. The risk in Mr. A’s case got terminated, maybe not wholly, on his completion of his building. Once the building was completed, the risk level went down to relatively the barest minimum. This effect is normally translated or interpreted as a hedge over inflation and is basically known with landed properties but in actual fact, it is applicable in almost any business-like creation which has being designed to have a terminal life as explained here.

Mr B or C on the other hand has to keep his business running indefinitely and as such his risk keeps running continually. If buildings projects like in Mr. A’s case runs indefinitely, then you can also be assured that his risk will as well run continually and even the hedge over inflation known with land properties wouldn’t come to be.

In the same likes, wholesalers tend to bear less risk than retailers. This is because ,though it may be costly be a wholesaler, all that concerns the wholesaler to get the goods from the manufacturers in bulk – discreet- and sell to the retailers whole will have to sell in bits to the consumers or end users. As we have it most times, the wholesalers usually have standby retailers that buy from them and as such the time between them having the goods and selling it is almost definite or short as compared retailers who have a lesser assurance of consumers in the first place and as such it takes long for their goods to get sold thereby the elongating the life of the risk inherent in the business.

More so, the discreet nature of wholesaler’s business creates an un-conducive environment for risk to be harbored because the accounting of his business can be more easily and tactically done. It is easy to know how many cartons of a particular item is left than knowing how many of the item itself is left. The bit by bit nature of business is in itself a harbinger of risk. While a retailer have be calculating each and every bit of an item and wholesaler only needs to know the number of cartons of such item. The life span of a wholesaler’s risk is short and he has to basically deal with retailers who may always be very few as opposed to the large populace of consumers a retailer will in turn deal with.

In closing, entering into business in the likes of the capacity examined in article is usually quite capitalistic or expensive which is why it is seen as strategy that buys or pays risk off. Employing the terminal life of risk in any venture has proven to work always though you may not have the chances of exploring the possibilities of a higher income along the way of your business; it however assures fixity of your income which is because of flattens the ball of risk to its minimum.

As such, this strategy is applicable in every area of business once you can create a terminal life for risk or enter into a business in such capacity where the risk life can be terminated at a predetermined stage or time. The hedge of inflation may be best known with landed properties but by the understanding of this mechanism of risk adjustment, you would agree with me it is not necessary restricted to landed properties alone. The hedge over inflation is afforded by landed properties because of the terminal risk life or cycle and as such anywhere or in any form a terminal risk life can created in any venture it will as well deliver you a quite risk-less venture or a hedge over inflation as it generally understood, translated or interpreted.

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