Risks Associated With Entrepreneurship – The Case Study of Nigeria

Entrepreneurship is deeply embedded in risks. The following definitions of entrepreneurship buttress the fact of the earlier sentence.

Kotler defined entrepreneurship as a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.

The above definition essentially paints a picture of a marketer-entrepreneur as an investor who in the pursuit of wealth-maximizing role in society creates products or values that satisfy the needs of a target market. This is basically the economic path that has transformed global economy from its rudimentary cottage industrial base with few assets to large industrial giants with assets worth billions of naira and whose activities or operations can trigger unintended events (risks) of immense consequence. The said unintended actions of entrepreneurship as a poignant dramatization of risks of entrepreneurship can sometimes assume frightening cost dimension. For instance, Pfizer International Incorporated, a multinational pharmaceutical giant was compelled to pay in compensation a total sum of 75 million dollars in judgment debt to Kano victims of its failed illegal drug tests (Sun, 2010 and Muanya, 2010).

The facts of the case are as follows. In 1996, there was an outbreak of meningitis epidemic in kano. Pfizer, as part of its clinical trial, administered untested drug, Travafloxavin (Trovan), without authorization to more than 200 infected children. 11 children died and the rest were incapacitated. Civil and criminal proceedings were instituted against Pfizer. An out of court settlement was reached in which the company had to pay $75m. This indeed is illustrative  of an aspect of risks in entrepreneurship. Others shall be raised later.

One aspect of risks embodied in marketing as made bare in the definition of marketing offered by Kotler is the risk element that investment in long-lived assets entails. This is aside from business operations already discussed.

Again consider this. An entrepreneur may be a path- breaker investor. Armed with a capital fund, he seeks an investment window to plough in the fund for greater growth. He is either to start up a new business from the ground up or he may be a venture capitalist seeking to partner with others in a unique initiative. Either way, he opens himself to a constellation of risks hardly unthought-of. Dr Innoson Chukwuma is well known brand in Nigeria and may fill up the space for an illustration of risks of entrepreneurship.

Take Innoson Plastic Factory located at Emene Industrial Estate in Enugu, for instance. This giant-sized factory has several product lines including plastic tables and chairs, water storage tanks, domestic utensils such as plates water filter, hand operated mops, gift items, tricycles, etc.

To manufacture these items there were installed heavy machinery that are managed by expatriates and local staff. The ware houses are stocked full with array of company products.

Besides, there could be found on any day large trucks belonging to the business either on the road conveying large stacks of items to customers, distributors or at the factory premises being loaded by designated staff for onward delivery. Since risk is concerned with what could go wrong, we could, using Innoson as an example, point out the nature of risks an entrepreneur faces, as follows:

On Premises Risks.

  • There is the risk of fire accident in the premises that could damage machinery and products.
  • Death or injury to factory workers.
  • Prospects of embezzlement of company fund by staff
  • Theft of other company assets such as air conditioners cars, products of the company etc.
  • Kidnapping of company directors and key men with the associated ransom thereof.
  • Breach of statutory provision that could attract sanction from appropriate government agency e.g. failure to pay sanitation fees as required by local law can attract sanction from Enugu State Waste ManagementAgency, ESWAMA, in Enugu State.

Off Premises Risks.

  • Product-related risks e.g. product failure.
  • Accidents caused by company vehicles to third parties and their  properties.
  • Loss of products in the event of accidents involving the trucks conveying company products.
  • Loss of cash-in-transit to and from banks. As the company of our illustration shows, no economic development is possible without investment in capital durable assets that embody irreversible decisions, and there is no such thing as irreversible decision without risk (Giariru, 1999).

Other forms of risks incidental to entrepreneurship can be identified from the viewpoint of consumers. In this regard, we have two aspects, namely; functional risks and psychological risks.


This relates to the risk associated with failure of products to live up to expectation.

Psychological Risks.

They focus on what people would think of one’s purchase decision (either approving or disapproving as the case may be). It is the psychological bout that every buyer encounters, technically called cognitive dissonance, which constitutes the psychological risks.

Products vary on the basis of whether they are high or functional or psychological risks or both combined. Drug products, for example, are perceived to be high in functional risk while automobile is perceived as being high in both functional and psychological risks.

What is done above may not have highlighted all conceivable elements Of risks in entrepreneurship. Rather, primary intention is to spotlight the presence of risks in entrepreneurship and to encourage risk consciousness and risk-thinking among entrepreneurs. This will produce the beneficial effect of enthronement of risk management culture at all levels of the entrepreneurship. The visible benefit of the risk thinking and risk management culture is loss minimization and improved profitability for business.