Risks and Ethical Issues In A Company

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Risks and Ethical Issues
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Introduction
When starting a business, there are several ethical issues that an entrepreneur should put
into consideration. Taking into account of these ethical concerns ensures the quick progress of
the business owner as well as providing the new business with long-term benefits. Besides, in the
wake of an investment boom, there is an increased demand from investors that are concerned
with not only the profitability of their investments but also with ensuring that their investment
attains a particular non-financial criterion. Such investors are guided by the moral duty of
balancing the pursuit of wealth with ethical concerns. Nonetheless, when making the decision to
either start a new venture or invest in a startup, the investor, as well as the entrepreneur should
consider certain risks that are associated with making such a decision. This paper identifies some
of the risks and ethical issues that entrepreneurs should consider when launching or investing in
a new start-up by making reference to the unethical behavior of companies such as Amazon,
Aluminum Company of America, and Coca Cola. From the identified risks and ethical issues, the
paper will further conduct a critical analysis of the top three issues identified and how to mitigate
them.
Risks/Risks Assessment
Starting a new business is associated with high-stake risks. An entrepreneur’s ability to
identify these risks is crucial to determine their success or failure. The same applies to an
investor. Investing in a new business is highly speculative and risky. As a result, an investor
should consider the risks linked with the type of investment, business, as well as security before
they make an informed decision on whether to invest in a start-up (Padilla-Meléndez, Fernández-
Gámez and Molina-Gómez, 2014, pp.872). Some of the risks that an entrepreneur should

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consider before launching a new startup and an investor investing in it include financial risk,
failure risk, and market risk.
According to Vesković, (2014), the tendency of entrepreneurs in making a risky decision
is common and is dependent on variables such as the willingness to take the risk. Such
entrepreneurial characteristics are important in determining risk preferences. In the case of
financial risk, entrepreneurs require funds, that may in the form of loans from investors or funds
obtained from their or their savings to start a business. The entrepreneur should formulate a
business plan that is part of the overall business plan and which should show income projections,
including the amount of money needed, and the return on investment for investors in the next
five years (Bouncken, Cesinger and Kraus, 2014, pp.36). Poor planning could result in
bankruptcy and the investors might lose their money. Market risk is the other risk that an
entrepreneur is faced with. The market of a service or a product can be affected by several
factors. New market trends, as well as the economic uncertainties, pose risk to start-ups. For
instance, in the case that the economy slumps, there are low chances that individuals will
purchase luxury products (Morkovina, Popkova, Panyavina, and Ivanova, 2014, pp.97).
Nonetheless, there is failure risk. A good business plan appeals to the investor. However,
changes in the business environment can lender a strategy worthless, making it difficult for a
start-up to attain its benchmarks.
In the case of an investor, the perspective of the three types of risk is different. For
instance, in the case of financial risk, investing in a start-up puts the money at risk. In some
cases, the company may fail completely, making it difficult for the investor to sell the stock
owned. In such an instance, the investor might lose all the money and in the case of start-ups,
losing the entire capital is a likely outcome (Hudáková and Masár, 2018, pp.145). Besides,