Topic Summaries

Risk and reward in business activity

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GCSE > Business > Eduqas > GCSE Business Topic Summaries > Enterprise and entrepreneurship > Risk and reward in business activity
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Formula sheet

Entrepreneurs weigh risks against potential rewards before starting a business. Every business decision carries risk, especially for entrepreneurs starting a new venture. However, these risks can bring significant rewards if the business succeeds. Understanding the balance between risk and reward is essential for good decision-making.

Risks Description Example
Business failure

Poor planning, low sales, or competition causes closure

 Poundland in the UK closing many stores, struggling to compete with online discount retailers like Temu
Financial loss Losing money personally or via loans/investments Toys R Us went out of business in 2018 with £15 million in unpaid taxes
Lack of security No guaranteed income, pension, or job benefits Company founders often will not earn a substantial salary until their business achieves financial stability

Rewards Description Examples
Business success Building a wellknown, growing business Gymshark became a £1bn+ company in under 10 years using influencer marketing
Profit Financial gain from added value Canva was founded in 2012 and now has an annual revenue of US$3 billion
Independence Being your own boss; control over decisions Innocent smoothies initially run as a side business by university graduates

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