Entrepreneurship in times of crisis: turning risks into opportunities

By Daniel Shin

We hate risk. But, we are living in unprecedented times. Investors often use the metaphor of the black swan to describe highly improbable and unimaginable events. Nowadays, there are too many Black Swan events in real life. Perhaps, Grey Rhino events may pose a greater threat than black swans, but, it is hard to segregate them. We could make contingency plans, but no plan can be perfect. A perfect plan simply doesn't exist for global-scale tail risk events.

Risks can turn into opportunities. Risk can be a source of inspiration and opportunity. Overcoming a risk removes our fear. People are willing to pay for critical necessities that can translate into business opportunities. The higher the stakes, the more intense the desire to buy no matter what price we have to pay. If there is no option to choose, the stake gets even higher because uncertainty increases if we don’t act on it.

Successful entrepreneurs approach risk differently by taking well-calculated risks. There are many ways to mitigate risks and turn them into profits. But, how do we do that? Entrepreneurs recognize flaws in the market and find solutions for such flaws. They don’t allow their vision to be limited by a lack of talent or resources. If they see a customer’s need, they will do all they can do to make it fulfilled.

Innovation and opportunity are tied to risk. Risk triggers changing how people do things. Combining that with the fact that customers have constantly changing demands, entrepreneurs must consistently pursue opportunities for new business based on customers’ utmost needs in crises. Entrepreneurs are not necessarily risk-takers, but they see opportunities in risks. If they can manage it, it will reduce the challenges that are associated with risks.

We have seen a return of old boys: war, pandemic, inflation, trade wars, social unrest and nuclear threats to name a few. To the next generation, it may feel too new, but experienced business leaders have already seen a variety of global-scale risks. However, there are new types of risks emerging. Cybersecurity, the future of work, AI and the list can go on and on. These risks are increasingly hard to control and their consequences are impossible to predict. We can’t just slow down a big surge because we don’t understand it.

Some risks gradually become more urgent and alarming. For this type of risk, directionally, we all know that they are coming. If we assess it, we can prevent and protect ourselves against risks. In reality, it is a lot easier said than done. Entrepreneurs should be equipped with leadership, strategy, circumstance, character and luck. It also requires flexibility. Facing the complicated competitive landscape and confronting the formidable tasks of turning risks into opportunities, entrepreneurs should firmly step up to tackle them early on.

Everyone has different risk appetites. Some risks are so big and wide. Investment and effort to mitigate and manage these risks can be costly endeavors. Some entrepreneurs adequately consider and document potential financial and economic trade-offs from their choices in dealing with risks. Risk appetite does not come from intuition. Reasonably practicable solutions and distribution of risks into much manageable smaller elements can help entrepreneurs to navigate out of risks.

Entrepreneurs who successfully manage risks can use their resources to maximize their returns on investment by efficiently allocating resources. Some entrepreneurs are more prone to risks because crises can act as a catalyst for change and a source of untapped opportunities. They rather take the challenges, not avoid them. When entrepreneurs face challenges, they have the power to reaffirm who they are and what their organization must do.

Persistence is a proven secret sauce to overcoming risks. It is now a lot harder to predict global-scale risks. If we can’t avoid it, we must enjoy it. When the challenges are faced and conquered, that creates a wonderful sense of accomplishment. Giving up means that we would neither overcome the challenges nor learn from them. Facing the challenges forces us, in a positive way, to work with others. Working with others in difficult times often encourages individuals to be more productive and innovative. Accountable members would act as a source of motivation to tackle the utmost challenges.

Entrepreneurs should not be dismayed by unexpected challenges because of their magnitude or scale. Determination and perseverance coupled with entrepreneurial rigor will pay off entrepreneurs’ efforts to rise and shine. Successful investors are waiting for the perfect moment when the market is about to hit its lowest point during crisis. Therefore, let’s stay in control by putting more energy into untapped opportunities that could have not been available otherwise.

Daniel Shin is a venture capitalist and senior luxury fashion executive, overseeing corporate development at MCM, a German luxury brand. He also teaches at Korea University.