DTU ProjectLab - User contributions [en-gb]

Managing start-ups in Unregulated Markets

2018-02-28T22:10:24Z

S175507: /* Refferences */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref> Cline, Preston B. (2003) The Merging of Risk Analysis and Adventure Education, [Online] Available at: https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf [Accessed 28 February 2018] </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>Dyer, Jeff. Furr, Nathan. Lefrand, Curtis (2014) The industries Plagued by Most Uncertainty [Online] Harvard Business Review. Available at: https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty [Accessed 28 February 2018] </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref> Parikh, Navnit K. and Majmudar, Piyush I. (2016) Uncertainty in General Insurance and Solvency Issues[Online] Available at: https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf [Accessed 28 February 2018] </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very sensitive to both external and internal forces due to the sheer amount of uncertainties and unknowns when setting up a company. In many instances start-ups will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one of the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus the financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as rising raw material prices or facility rents.

=== Market risks ===
In order for a start-up to make a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the number of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out-compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lie within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulations your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change their business model or start a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risk associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted with respect to handling their time while at work as well as not stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.
<ref> Harper, Stephen C. (2005). Extraordinary Entrepreneur: the Professional Guide to Starting an Exceptional Enterprise. Hoboken, New Jersey, USA. P. 8-15. </ref>

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, with respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===
If a company does not fall within any law or regulations, it in theory means that their product or service can be marketed and sold freely. However, this involves numerous risks, since regulation can be implemented at any time. This can cause serious consequences in different ways.

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. Although this in some cases can be viewed positively, since only part of the company is affected, it can also result in high legal costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become so. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs with money laundering. <ref> 5: Morgan, Peter (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations [Online] Available at: https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[Accessed 21 February 2018]
</ref>

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is a strategic planning tool for companies. It is used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized. <ref> Harrison, Jeffery P. (2010) Essentials of Strategic Planning in Healthcare [Online] Available at: https://www.ache.org/pdf/secure/gifts/Harrison_Chapter5.pdf [Accessed 21 February 2018] </ref>

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It is used to determine the environment that the business lie within with respect to the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g. tariffs and taxes. Economic refers to how the economy in a given area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to the rate the in which the technology is changing in the area and is often specific for each industry.

==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focus its risk reduction measures. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST is becoming increasingly necessary when determining external risks. <ref> UNICEF.(2017) Understanding your external and internal context for better planning and decision-making [Online] Available at: https://www.unicef.org/knowledge-exchange/files/SWOT_and_PESTEL_production.pdf [Accessed 22 February 2018]
</ref>

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationships, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Unlike the previous models, the focus of BMC is internally in the company. <ref> Diehl, Barbara. and Dr. Nikolou, Maria (2013) From Business Models to Business Plans [Online] Available at: https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf [Accessed 21 February 2018] </ref>

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Unlike from BMC this model includes external factors such as constraints and risks. It is mainly designed to manage projects, but can be applicable to a company as a whole or a single product. <ref> 9: Tran, Lihn.(2017) The Project Canvas: Setting the Direction for Your Project’s Success [Online] Available at: https://www.inloox.com/company/blog/articles/the-project-canvas-setting-the-direction-for-your-project-s-success/ [Accessed 22 February 2018] </ref>

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC or project canvas with either a PEST or PESTEL to incorporate these risks. <ref> 10: Diehl, Barbara. and Dr. Nikolou, Maria (2013) From Business Models to Business Plans [Online] Available at: https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf [Accessed 21 February 2018] </ref>

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the country’s legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally creating a BMC or project canvas, with a business model that facilitates the threats identified in the two previous analysis.

Managing start-ups is a time consuming task, that involves many unknowns and uncertainties, however using or combining the correct tools will facilitate the process.

==Refferences==

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T22:09:57Z

S175507: /* BMC */

Managing start-ups in Unregulated Markets

2018-02-28T22:08:41Z

S175507: /* Risk assessment */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref> Cline, Preston B. (2003) The Merging of Risk Analysis and Adventure Education, [Online] Available at: https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf [Accessed 28 February 2018] </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>Dyer, Jeff. Furr, Nathan. Lefrand, Curtis (2014) The industries Plagued by Most Uncertainty [Online] Harvard Business Review. Available at: https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty [Accessed 28 February 2018] </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref> Parikh, Navnit K. and Majmudar, Piyush I. (2016) Uncertainty in General Insurance and Solvency Issues[Online] Available at: https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf [Accessed 28 February 2018] </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very sensitive to both external and internal forces due to the sheer amount of uncertainties and unknowns when setting up a company. In many instances start-ups will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one of the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus the financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as rising raw material prices or facility rents.

=== Market risks ===
In order for a start-up to make a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the number of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out-compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lie within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulations your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change their business model or start a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risk associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted with respect to handling their time while at work as well as not stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.
<ref> Harper, Stephen C. (2005). Extraordinary Entrepreneur: the Professional Guide to Starting an Exceptional Enterprise. Hoboken, New Jersey, USA. P. 8-15. </ref>

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, with respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===
If a company does not fall within any law or regulations, it in theory means that their product or service can be marketed and sold freely. However, this involves numerous risks, since regulation can be implemented at any time. This can cause serious consequences in different ways.

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. Although this in some cases can be viewed positively, since only part of the company is affected, it can also result in high legal costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become so. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs with money laundering. <ref> 5: Morgan, Peter (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations [Online] Available at: https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[Accessed 21 February 2018]
</ref>

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is a strategic planning tool for companies. It is used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized. <ref> Harrison, Jeffery P. (2010) Essentials of Strategic Planning in Healthcare [Online] Available at: https://www.ache.org/pdf/secure/gifts/Harrison_Chapter5.pdf [Accessed 21 February 2018] </ref>

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It is used to determine the environment that the business lie within with respect to the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g. tariffs and taxes. Economic refers to how the economy in a given area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to the rate the in which the technology is changing in the area and is often specific for each industry.

==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focus its risk reduction measures. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST is becoming increasingly necessary when determining external risks. <ref> UNICEF.(2017) Understanding your external and internal context for better planning and decision-making [Online] Available at: https://www.unicef.org/knowledge-exchange/files/SWOT_and_PESTEL_production.pdf [Accessed 22 February 2018]
</ref>

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationships, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Unlike the previous models, the focus of BMC is internally in the company. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed on 18th of February) </ref>

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Unlike from BMC this model includes external factors such as constraints and risks. It is mainly designed to manage projects, but can be applicable to a company as a whole or a single product. <ref> "https://www.inloox.com/company/blog/articles/the-project-canvas-setting-the-direction-for-your-project-s-success/" (Accessed on 18th of February) </ref>

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC or project canvas with either a PEST or PESTEL to incorporate these risks. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed 18th of February) </ref>

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the country’s legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally creating a BMC or project canvas, with a business model that facilitates the threats identified in the two previous analysis.

Managing start-ups is a time consuming task, that involves many unknowns and uncertainties, however using or combining the correct tools will facilitate the process.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T22:04:27Z

S175507: /* Risk assessment */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref> Cline, Preston B. (2003) The Merging of Risk Analysis and Adventure Education, [Online] Available at: https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf [Accessed 28 February 2018] </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>Dyer, Jeff. Furr, Nathan. Lefrand, Curtis (2014) The industries Plagued by Most Uncertainty [Online] Harvard Business Review. Available at: https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty [Accessed 28 February 2018] </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref> Parikh, Navnit K. and Majmudar, Piyush I. (2016) Uncertainty in General Insurance and Solvency Issues[Online] Available at: https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf [Accessed 28 February 2018] </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very sensitive to both external and internal forces due to the sheer amount of uncertainties and unknowns when setting up a company. In many instances start-ups will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one of the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus the financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as rising raw material prices or facility rents.

=== Market risks ===
In order for a start-up to make a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the number of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out-compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lie within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulations your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change their business model or start a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risk associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted with respect to handling their time while at work as well as not stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.
<ref> Harper, Stephen C. (2005). Extraordinary Entrepreneur: the Professional Guide to Starting an Exceptional Enterprise. Hoboken, New Jersey, USA. P. 8-15. </ref>

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, with respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===
If a company does not fall within any law or regulations, it in theory means that their product or service can be marketed and sold freely. However, this involves numerous risks, since regulation can be implemented at any time. This can cause serious consequences in different ways.

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. Although this in some cases can be viewed positively, since only part of the company is affected, it can also result in high legal costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become so. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs with money laundering. <ref> 5: Morgan, Peter (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations [Online] Available at: https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[Accessed 21 February 2018]
</ref>

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is a strategic planning tool for companies. It is used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized. <ref>

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It is used to determine the environment that the business lie within with respect to the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g. tariffs and taxes. Economic refers to how the economy in a given area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to the rate the in which the technology is changing in the area and is often specific for each industry.

==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focus its risk reduction measures. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST is becoming increasingly necessary when determining external risks. <ref> https://www.unicef.org/knowledge-exchange/files/SWOT_and_PESTEL_production.pdf" (Accessed 20th of February) </ref>

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationships, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Unlike the previous models, the focus of BMC is internally in the company. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed on 18th of February) </ref>

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Unlike from BMC this model includes external factors such as constraints and risks. It is mainly designed to manage projects, but can be applicable to a company as a whole or a single product. <ref> "https://www.inloox.com/company/blog/articles/the-project-canvas-setting-the-direction-for-your-project-s-success/" (Accessed on 18th of February) </ref>

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC or project canvas with either a PEST or PESTEL to incorporate these risks. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed 18th of February) </ref>

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the country’s legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally creating a BMC or project canvas, with a business model that facilitates the threats identified in the two previous analysis.

Managing start-ups is a time consuming task, that involves many unknowns and uncertainties, however using or combining the correct tools will facilitate the process.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T21:49:28Z

S175507: /* Evaluating risks */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref> Cline, Preston B. (2003) The Merging of Risk Analysis and Adventure Education, [Online] Available at: https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf [Accessed 28 February 2018] </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>Dyer, Jeff. Furr, Nathan. Lefrand, Curtis (2014) The industries Plagued by Most Uncertainty [Online] Harvard Business Review. Available at: https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty [Accessed 28 February 2018] </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref> Parikh, Navnit K. and Majmudar, Piyush I. (2016) Uncertainty in General Insurance and Solvency Issues[Online] Available at: https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf [Accessed 28 February 2018] </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very sensitive to both external and internal forces due to the sheer amount of uncertainties and unknowns when setting up a company. In many instances start-ups will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one of the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus the financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as rising raw material prices or facility rents.

=== Market risks ===
In order for a start-up to make a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the number of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out-compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lie within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulations your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change their business model or start a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risk associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted with respect to handling their time while at work as well as not stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.
<ref> Harper, Stephen C. (2005). Extraordinary Entrepreneur: the Professional Guide to Starting an Exceptional Enterprise. Hoboken, New Jersey, USA. P. 8-15. </ref>

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, with respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===
If a company does not fall within any law or regulations, it in theory means that their product or service can be marketed and sold freely. However, this involves numerous risks, since regulation can be implemented at any time. This can cause serious consequences in different ways.

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. Although this in some cases can be viewed positively, since only part of the company is affected, it can also result in high legal costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become so. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs with money laundering. <ref> 5: Morgan, Peter (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations [Online] Available at: https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[Accessed 21 February 2018]
</ref>

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is a strategic planning tool for companies. It is used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized.

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It is used to determine the environment that the business lie within with respect to the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g. tariffs and taxes. Economic refers to how the economy in a given area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to the rate the in which the technology is changing in the area and is often specific for each industry.

==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focus its risk reduction measures. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST is becoming increasingly necessary when determining external risks. <ref> https://www.unicef.org/knowledge-exchange/files/SWOT_and_PESTEL_production.pdf" (Accessed 20th of February) </ref>

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationships, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Unlike the previous models, the focus of BMC is internally in the company. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed on 18th of February) </ref>

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Unlike from BMC this model includes external factors such as constraints and risks. It is mainly designed to manage projects, but can be applicable to a company as a whole or a single product. <ref> "https://www.inloox.com/company/blog/articles/the-project-canvas-setting-the-direction-for-your-project-s-success/" (Accessed on 18th of February) </ref>

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC or project canvas with either a PEST or PESTEL to incorporate these risks. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed 18th of February) </ref>

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the country’s legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally creating a BMC or project canvas, with a business model that facilitates the threats identified in the two previous analysis.

Managing start-ups is a time consuming task, that involves many unknowns and uncertainties, however using or combining the correct tools will facilitate the process.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T21:47:15Z

S175507: /* Being suid */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref> Cline, Preston B. (2003) The Merging of Risk Analysis and Adventure Education, [Online] Available at: https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf [Accessed 28 February 2018] </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>Dyer, Jeff. Furr, Nathan. Lefrand, Curtis (2014) The industries Plagued by Most Uncertainty [Online] Harvard Business Review. Available at: https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty [Accessed 28 February 2018] </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref> Parikh, Navnit K. and Majmudar, Piyush I. (2016) Uncertainty in General Insurance and Solvency Issues[Online] Available at: https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf [Accessed 28 February 2018] </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very sensitive to both external and internal forces due to the sheer amount of uncertainties and unknowns when setting up a company. In many instances start-ups will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one of the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus the financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as rising raw material prices or facility rents.

=== Market risks ===
In order for a start-up to make a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the number of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out-compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lie within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulations your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change their business model or start a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risk associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted with respect to handling their time while at work as well as not stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.
<ref> Harper, Stephen C. (2005). Extraordinary Entrepreneur: the Professional Guide to Starting an Exceptional Enterprise. Hoboken, New Jersey, USA. P. 8-15. </ref>

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, with respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===
If a company does not fall within any law or regulations, it in theory means that their product or service can be marketed and sold freely. However, this involves numerous risks, since regulation can be implemented at any time. This can cause serious consequences in different ways.

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. Although this in some cases can be viewed positively, since only part of the company is affected, it can also result in high legal costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become so. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs with money laundering. <ref> 5: Morgan, Peter (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations [Online] Available at: https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[Accessed 21 February 2018]
</ref>

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized. <ref> "https://www.ache.org/pdf/secure/gifts/Harrison_Chapter5.pdf" (Accessed 15th of February) </ref>

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks. <ref> https://www.unicef.org/knowledge-exchange/files/SWOT_and_PESTEL_production.pdf" (Accessed 20th of February) </ref>

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed on 18th of February) </ref>

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product. <ref> "https://www.inloox.com/company/blog/articles/the-project-canvas-setting-the-direction-for-your-project-s-success/" (Accessed on 18th of February) </ref>

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed 18th of February) </ref>

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the country’s legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally creating a BMC or project canvas, with a business model that facilitates the threats identified in the two previous analysis.

Managing start-ups is a time consuming task, that involves many unknowns and uncertainties, however using or combining the correct tools will facilitate the process.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T21:43:38Z

S175507: /* Human risks */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref> Cline, Preston B. (2003) The Merging of Risk Analysis and Adventure Education, [Online] Available at: https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf [Accessed 28 February 2018] </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>Dyer, Jeff. Furr, Nathan. Lefrand, Curtis (2014) The industries Plagued by Most Uncertainty [Online] Harvard Business Review. Available at: https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty [Accessed 28 February 2018] </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref> Parikh, Navnit K. and Majmudar, Piyush I. (2016) Uncertainty in General Insurance and Solvency Issues[Online] Available at: https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf [Accessed 28 February 2018] </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very sensitive to both external and internal forces due to the sheer amount of uncertainties and unknowns when setting up a company. In many instances start-ups will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one of the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus the financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as rising raw material prices or facility rents.

=== Market risks ===
In order for a start-up to make a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the number of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out-compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lie within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulations your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change their business model or start a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risk associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted with respect to handling their time while at work as well as not stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.
<ref> Harper, Stephen C. (2005). Extraordinary Entrepreneur: the Professional Guide to Starting an Exceptional Enterprise. Hoboken, New Jersey, USA. P. 8-15. </ref>

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, with respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===
If a company does not fall within any law or regulations, it in theory means that their product or service can be marketed and sold freely. However, this involves numerous risks, since regulation can be implemented at any time. This can cause serious consequences in different ways.

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. Although this in some cases can be viewed positively, since only part of the company is affected, it can also result in high legal costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become so. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs with money laundering. <ref> "https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf" (Accessed on 23rd of February) </ref>

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized. <ref> "https://www.ache.org/pdf/secure/gifts/Harrison_Chapter5.pdf" (Accessed 15th of February) </ref>

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks. <ref> https://www.unicef.org/knowledge-exchange/files/SWOT_and_PESTEL_production.pdf" (Accessed 20th of February) </ref>

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed on 18th of February) </ref>

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product. <ref> "https://www.inloox.com/company/blog/articles/the-project-canvas-setting-the-direction-for-your-project-s-success/" (Accessed on 18th of February) </ref>

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed 18th of February) </ref>

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the country’s legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally creating a BMC or project canvas, with a business model that facilitates the threats identified in the two previous analysis.

Managing start-ups is a time consuming task, that involves many unknowns and uncertainties, however using or combining the correct tools will facilitate the process.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T21:37:03Z

S175507: /* Uncertainties vs. Unknowns */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref> Cline, Preston B. (2003) The Merging of Risk Analysis and Adventure Education, [Online] Available at: https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf [Accessed 28 February 2018] </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>Dyer, Jeff. Furr, Nathan. Lefrand, Curtis (2014) The industries Plagued by Most Uncertainty [Online] Harvard Business Review. Available at: https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty [Accessed 28 February 2018] </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref> Parikh, Navnit K. and Majmudar, Piyush I. (2016) Uncertainty in General Insurance and Solvency Issues[Online] Available at: https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf [Accessed 28 February 2018] </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very sensitive to both external and internal forces due to the sheer amount of uncertainties and unknowns when setting up a company. In many instances start-ups will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one of the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus the financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as rising raw material prices or facility rents.

=== Market risks ===
In order for a start-up to make a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the number of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out-compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lie within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulations your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change their business model or start a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risk associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted with respect to handling their time while at work as well as not stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.
<ref> "https://books.google.dk/books?id=9Kvv2Yv67jYC&pg=PA9&dq=risks+associated+with+starting+a+business&hl=da&sa=X&ved=0ahUKEwj3gYniv8nZAhUPYVAKHRUtAMkQ6AEILjAB#v=onepage&q=risks%20associated%20with%20starting%20a%20business&f=false" (Accesed on 27th of February) </ref>

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, with respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===
If a company does not fall within any law or regulations, it in theory means that their product or service can be marketed and sold freely. However, this involves numerous risks, since regulation can be implemented at any time. This can cause serious consequences in different ways.

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. Although this in some cases can be viewed positively, since only part of the company is affected, it can also result in high legal costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become so. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs with money laundering. <ref> "https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf" (Accessed on 23rd of February) </ref>

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized. <ref> "https://www.ache.org/pdf/secure/gifts/Harrison_Chapter5.pdf" (Accessed 15th of February) </ref>

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks. <ref> https://www.unicef.org/knowledge-exchange/files/SWOT_and_PESTEL_production.pdf" (Accessed 20th of February) </ref>

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed on 18th of February) </ref>

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product. <ref> "https://www.inloox.com/company/blog/articles/the-project-canvas-setting-the-direction-for-your-project-s-success/" (Accessed on 18th of February) </ref>

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed 18th of February) </ref>

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the country’s legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally creating a BMC or project canvas, with a business model that facilitates the threats identified in the two previous analysis.

Managing start-ups is a time consuming task, that involves many unknowns and uncertainties, however using or combining the correct tools will facilitate the process.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T21:36:19Z

S175507: /* What are risks? */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref> Cline, Preston B. (2003) The Merging of Risk Analysis and Adventure Education, [Online] Available at: https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf [Accessed 28 February 2018] </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>"https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty",(Accessed on 28th of February) </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref>"https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf" (Accessed on 20th of February) </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very sensitive to both external and internal forces due to the sheer amount of uncertainties and unknowns when setting up a company. In many instances start-ups will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one of the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus the financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as rising raw material prices or facility rents.

=== Market risks ===
In order for a start-up to make a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the number of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out-compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lie within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulations your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change their business model or start a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risk associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted with respect to handling their time while at work as well as not stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.
<ref> "https://books.google.dk/books?id=9Kvv2Yv67jYC&pg=PA9&dq=risks+associated+with+starting+a+business&hl=da&sa=X&ved=0ahUKEwj3gYniv8nZAhUPYVAKHRUtAMkQ6AEILjAB#v=onepage&q=risks%20associated%20with%20starting%20a%20business&f=false" (Accesed on 27th of February) </ref>

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, with respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===
If a company does not fall within any law or regulations, it in theory means that their product or service can be marketed and sold freely. However, this involves numerous risks, since regulation can be implemented at any time. This can cause serious consequences in different ways.

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. Although this in some cases can be viewed positively, since only part of the company is affected, it can also result in high legal costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become so. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs with money laundering. <ref> "https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf" (Accessed on 23rd of February) </ref>

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized. <ref> "https://www.ache.org/pdf/secure/gifts/Harrison_Chapter5.pdf" (Accessed 15th of February) </ref>

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks. <ref> https://www.unicef.org/knowledge-exchange/files/SWOT_and_PESTEL_production.pdf" (Accessed 20th of February) </ref>

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed on 18th of February) </ref>

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product. <ref> "https://www.inloox.com/company/blog/articles/the-project-canvas-setting-the-direction-for-your-project-s-success/" (Accessed on 18th of February) </ref>

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed 18th of February) </ref>

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the country’s legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally creating a BMC or project canvas, with a business model that facilitates the threats identified in the two previous analysis.

Managing start-ups is a time consuming task, that involves many unknowns and uncertainties, however using or combining the correct tools will facilitate the process.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T21:28:25Z

S175507: /* What are risks? */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref> Cline, Preston B. (2003) The Merging of Risk Analysis and Adventure Education[Online] Available at: https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf [Accessed 28 February 2018] </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>"https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty",(Accessed on 28th of February) </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref>"https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf" (Accessed on 20th of February) </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very sensitive to both external and internal forces due to the sheer amount of uncertainties and unknowns when setting up a company. In many instances start-ups will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one of the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus the financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as rising raw material prices or facility rents.

=== Market risks ===
In order for a start-up to make a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the number of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out-compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lie within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulations your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change their business model or start a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risk associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted with respect to handling their time while at work as well as not stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.
<ref> "https://books.google.dk/books?id=9Kvv2Yv67jYC&pg=PA9&dq=risks+associated+with+starting+a+business&hl=da&sa=X&ved=0ahUKEwj3gYniv8nZAhUPYVAKHRUtAMkQ6AEILjAB#v=onepage&q=risks%20associated%20with%20starting%20a%20business&f=false" (Accesed on 27th of February) </ref>

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, with respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===
If a company does not fall within any law or regulations, it in theory means that their product or service can be marketed and sold freely. However, this involves numerous risks, since regulation can be implemented at any time. This can cause serious consequences in different ways.

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. Although this in some cases can be viewed positively, since only part of the company is affected, it can also result in high legal costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become so. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs with money laundering. <ref> "https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf" (Accessed on 23rd of February) </ref>

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized. <ref> "https://www.ache.org/pdf/secure/gifts/Harrison_Chapter5.pdf" (Accessed 15th of February) </ref>

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks. <ref> https://www.unicef.org/knowledge-exchange/files/SWOT_and_PESTEL_production.pdf" (Accessed 20th of February) </ref>

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed on 18th of February) </ref>

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product. <ref> "https://www.inloox.com/company/blog/articles/the-project-canvas-setting-the-direction-for-your-project-s-success/" (Accessed on 18th of February) </ref>

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed 18th of February) </ref>

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the country’s legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally creating a BMC or project canvas, with a business model that facilitates the threats identified in the two previous analysis.

Managing start-ups is a time consuming task, that involves many unknowns and uncertainties, however using or combining the correct tools will facilitate the process.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T21:26:14Z

S175507: /* What are risks? */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref> Cline, Preston B. (2003) The Merging of Risk Analysis and Adventure Education, [Online] Available at: https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf [Accessed 28 February 2018] </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>"https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty",(Accessed on 28th of February) </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref>"https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf" (Accessed on 20th of February) </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very sensitive to both external and internal forces due to the sheer amount of uncertainties and unknowns when setting up a company. In many instances start-ups will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one of the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus the financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as rising raw material prices or facility rents.

=== Market risks ===
In order for a start-up to make a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the number of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out-compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lie within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulations your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change their business model or start a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risk associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted with respect to handling their time while at work as well as not stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.
<ref> "https://books.google.dk/books?id=9Kvv2Yv67jYC&pg=PA9&dq=risks+associated+with+starting+a+business&hl=da&sa=X&ved=0ahUKEwj3gYniv8nZAhUPYVAKHRUtAMkQ6AEILjAB#v=onepage&q=risks%20associated%20with%20starting%20a%20business&f=false" (Accesed on 27th of February) </ref>

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, with respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===
If a company does not fall within any law or regulations, it in theory means that their product or service can be marketed and sold freely. However, this involves numerous risks, since regulation can be implemented at any time. This can cause serious consequences in different ways.

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. Although this in some cases can be viewed positively, since only part of the company is affected, it can also result in high legal costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become so. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs with money laundering. <ref> "https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf" (Accessed on 23rd of February) </ref>

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized. <ref> "https://www.ache.org/pdf/secure/gifts/Harrison_Chapter5.pdf" (Accessed 15th of February) </ref>

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks. <ref> https://www.unicef.org/knowledge-exchange/files/SWOT_and_PESTEL_production.pdf" (Accessed 20th of February) </ref>

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed on 18th of February) </ref>

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product. <ref> "https://www.inloox.com/company/blog/articles/the-project-canvas-setting-the-direction-for-your-project-s-success/" (Accessed on 18th of February) </ref>

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed 18th of February) </ref>

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the country’s legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally creating a BMC or project canvas, with a business model that facilitates the threats identified in the two previous analysis.

Managing start-ups is a time consuming task, that involves many unknowns and uncertainties, however using or combining the correct tools will facilitate the process.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T21:23:25Z

S175507: /* Managing start-ups in unregulated markets */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref>"https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf",(Accessed on 28th of February) </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>"https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty",(Accessed on 28th of February) </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref>"https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf" (Accessed on 20th of February) </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very sensitive to both external and internal forces due to the sheer amount of uncertainties and unknowns when setting up a company. In many instances start-ups will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one of the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus the financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as rising raw material prices or facility rents.

=== Market risks ===
In order for a start-up to make a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the number of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out-compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lie within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulations your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change their business model or start a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risk associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted with respect to handling their time while at work as well as not stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.
<ref> "https://books.google.dk/books?id=9Kvv2Yv67jYC&pg=PA9&dq=risks+associated+with+starting+a+business&hl=da&sa=X&ved=0ahUKEwj3gYniv8nZAhUPYVAKHRUtAMkQ6AEILjAB#v=onepage&q=risks%20associated%20with%20starting%20a%20business&f=false" (Accesed on 27th of February) </ref>

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, with respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===
If a company does not fall within any law or regulations, it in theory means that their product or service can be marketed and sold freely. However, this involves numerous risks, since regulation can be implemented at any time. This can cause serious consequences in different ways.

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. Although this in some cases can be viewed positively, since only part of the company is affected, it can also result in high legal costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become so. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs with money laundering. <ref> "https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf" (Accessed on 23rd of February) </ref>

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized. <ref> "https://www.ache.org/pdf/secure/gifts/Harrison_Chapter5.pdf" (Accessed 15th of February) </ref>

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks. <ref> https://www.unicef.org/knowledge-exchange/files/SWOT_and_PESTEL_production.pdf" (Accessed 20th of February) </ref>

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed on 18th of February) </ref>

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product. <ref> "https://www.inloox.com/company/blog/articles/the-project-canvas-setting-the-direction-for-your-project-s-success/" (Accessed on 18th of February) </ref>

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed 18th of February) </ref>

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the country’s legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally creating a BMC or project canvas, with a business model that facilitates the threats identified in the two previous analysis.

Managing start-ups is a time consuming task, that involves many unknowns and uncertainties, however using or combining the correct tools will facilitate the process.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T21:22:30Z

S175507: /* Managing start-ups in unregulated markets */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref>"https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf",(Accessed on 28th of February) </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>"https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty",(Accessed on 28th of February) </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref>"https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf" (Accessed on 20th of February) </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very sensitive to both external and internal forces due to the sheer amount of uncertainties and unknowns when setting up a company. In many instances start-ups will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one of the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus the financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as rising raw material prices or facility rents.

=== Market risks ===
In order for a start-up to make a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the number of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out-compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lie within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulations your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change their business model or start a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risk associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted with respect to handling their time while at work as well as not stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.
<ref> "https://books.google.dk/books?id=9Kvv2Yv67jYC&pg=PA9&dq=risks+associated+with+starting+a+business&hl=da&sa=X&ved=0ahUKEwj3gYniv8nZAhUPYVAKHRUtAMkQ6AEILjAB#v=onepage&q=risks%20associated%20with%20starting%20a%20business&f=false" (Accesed on 27th of February) </ref>

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, with respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===
If a company does not fall within any law or regulations, it in theory means that their product or service can be marketed and sold freely. However, this involves numerous risks, since regulation can be implemented at any time. This can cause serious consequences in different ways.

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. Although this in some cases can be viewed positively, since only part of the company is affected, it can also result in high legal costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become so. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs with money laundering. <ref> "https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf" (Accessed on 23rd of February) </ref>

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized. <ref> "https://www.ache.org/pdf/secure/gifts/Harrison_Chapter5.pdf" (Accessed 15th of February) </ref>

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks. <ref> https://www.unicef.org/knowledge-exchange/files/SWOT_and_PESTEL_production.pdf" (Accessed 20th of February) </ref>

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed on 18th of February) </ref>

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product. <ref> "https://www.inloox.com/company/blog/articles/the-project-canvas-setting-the-direction-for-your-project-s-success/" (Accessed on 18th of February) </ref>

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed 18th of February) </ref>

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the countries legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally create a BMC/project canvas, with a business model that facilitates the threats identified in the two previous analysis.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T21:22:09Z

S175507: /* Managing start-ups in unregulated markets */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref>"https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf",(Accessed on 28th of February) </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>"https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty",(Accessed on 28th of February) </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref>"https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf" (Accessed on 20th of February) </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very sensitive to both external and internal forces due to the sheer amount of uncertainties and unknowns when setting up a company. In many instances start-ups will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one of the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus the financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as rising raw material prices or facility rents.

=== Market risks ===
In order for a start-up to make a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the number of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out-compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lie within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulations your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change their business model or start a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risk associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted with respect to handling their time while at work as well as not stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.
<ref> "https://books.google.dk/books?id=9Kvv2Yv67jYC&pg=PA9&dq=risks+associated+with+starting+a+business&hl=da&sa=X&ved=0ahUKEwj3gYniv8nZAhUPYVAKHRUtAMkQ6AEILjAB#v=onepage&q=risks%20associated%20with%20starting%20a%20business&f=false" (Accesed on 27th of February) </ref>

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, with respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===
If a company does not fall within any law or regulations, it in theory means that their product or service can be marketed and sold freely. However, this involves numerous risks, since regulation can be implemented at any time. This can cause serious consequences in different ways.

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. Although this in some cases can be viewed positively, since only part of the company is affected, it can also result in high legal costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become so. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs with money laundering. <ref> "https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf" (Accessed on 23rd of February) </ref>

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized. <ref> "https://www.ache.org/pdf/secure/gifts/Harrison_Chapter5.pdf" (Accessed 15th of February) </ref>

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks. <ref> https://www.unicef.org/knowledge-exchange/files/SWOT_and_PESTEL_production.pdf" (Accessed 20th of February) </ref>

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed on 18th of February) </ref>

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product. <ref> "https://www.inloox.com/company/blog/articles/the-project-canvas-setting-the-direction-for-your-project-s-success/" (Accessed on 18th of February) </ref>

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed 18th of February) </ref>

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the countries legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally create a BMC/project canvas, with a business model that facilitates the threats identified in the two previous analysis.
<ref> Lisse, Jamie. (2017) How to calculate an hourly production rate. Hearst Newspapers, [Online] Available at: http://smallbusiness.chron.com/calculate-hourly-production-rate-19221.html [Accessed 28 April 2017] </ref>

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T21:15:39Z

S175507: /* BMC */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref>"https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf",(Accessed on 28th of February) </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>"https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty",(Accessed on 28th of February) </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref>"https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf" (Accessed on 20th of February) </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very sensitive to both external and internal forces due to the sheer amount of uncertainties and unknowns when setting up a company. In many instances start-ups will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one of the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus the financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as rising raw material prices or facility rents.

=== Market risks ===
In order for a start-up to make a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the number of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out-compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lie within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulations your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change their business model or start a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risk associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted with respect to handling their time while at work as well as not stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.
<ref> "https://books.google.dk/books?id=9Kvv2Yv67jYC&pg=PA9&dq=risks+associated+with+starting+a+business&hl=da&sa=X&ved=0ahUKEwj3gYniv8nZAhUPYVAKHRUtAMkQ6AEILjAB#v=onepage&q=risks%20associated%20with%20starting%20a%20business&f=false" (Accesed on 27th of February) </ref>

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, with respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===
If a company does not fall within any law or regulations, it in theory means that their product or service can be marketed and sold freely. However, this involves numerous risks, since regulation can be implemented at any time. This can cause serious consequences in different ways.

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. Although this in some cases can be viewed positively, since only part of the company is affected, it can also result in high legal costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become so. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs with money laundering. <ref> "https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf" (Accessed on 23rd of February) </ref>

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized. <ref> "https://www.ache.org/pdf/secure/gifts/Harrison_Chapter5.pdf" (Accessed 15th of February) </ref>

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks. <ref> https://www.unicef.org/knowledge-exchange/files/SWOT_and_PESTEL_production.pdf" (Accessed 20th of February) </ref>

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed on 18th of February) </ref>

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product. <ref> "https://www.inloox.com/company/blog/articles/the-project-canvas-setting-the-direction-for-your-project-s-success/" (Accessed on 18th of February) </ref>

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks. <ref> "https://www.sbs.ox.ac.uk/sites/default/files/Entrepreneurship_Centre/Docs/diehl-nikolou.pdf" (Accessed 18th of February) </ref>

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the countries legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally create a BMC/project canvas, with a business model that facilitates the threats identified in the two previous analysis.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T21:10:43Z

S175507: /* Risk assessment */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref>"https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf",(Accessed on 28th of February) </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>"https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty",(Accessed on 28th of February) </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref>"https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf" (Accessed on 20th of February) </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very sensitive to both external and internal forces due to the sheer amount of uncertainties and unknowns when setting up a company. In many instances start-ups will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one of the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus the financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as rising raw material prices or facility rents.

=== Market risks ===
In order for a start-up to make a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the number of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out-compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lie within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulations your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change their business model or start a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risk associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted with respect to handling their time while at work as well as not stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.
<ref> "https://books.google.dk/books?id=9Kvv2Yv67jYC&pg=PA9&dq=risks+associated+with+starting+a+business&hl=da&sa=X&ved=0ahUKEwj3gYniv8nZAhUPYVAKHRUtAMkQ6AEILjAB#v=onepage&q=risks%20associated%20with%20starting%20a%20business&f=false" (Accesed on 27th of February) </ref>

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, with respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===
If a company does not fall within any law or regulations, it in theory means that their product or service can be marketed and sold freely. However, this involves numerous risks, since regulation can be implemented at any time. This can cause serious consequences in different ways.

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. Although this in some cases can be viewed positively, since only part of the company is affected, it can also result in high legal costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become so. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs with money laundering. <ref> "https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf" (Accessed on 23rd of February) </ref>

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized. <ref> "https://www.ache.org/pdf/secure/gifts/Harrison_Chapter5.pdf" (Accessed 15th of February) </ref>

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks. <ref> https://www.unicef.org/knowledge-exchange/files/SWOT_and_PESTEL_production.pdf" (Accessed 20th of February) </ref>

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company.

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product.

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks.

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the countries legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally create a BMC/project canvas, with a business model that facilitates the threats identified in the two previous analysis.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T21:08:49Z

S175507: /* Risk assessment */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref>"https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf",(Accessed on 28th of February) </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>"https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty",(Accessed on 28th of February) </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref>"https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf" (Accessed on 20th of February) </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very sensitive to both external and internal forces due to the sheer amount of uncertainties and unknowns when setting up a company. In many instances start-ups will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one of the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus the financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as rising raw material prices or facility rents.

=== Market risks ===
In order for a start-up to make a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the number of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out-compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lie within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulations your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change their business model or start a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risk associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted with respect to handling their time while at work as well as not stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.
<ref> "https://books.google.dk/books?id=9Kvv2Yv67jYC&pg=PA9&dq=risks+associated+with+starting+a+business&hl=da&sa=X&ved=0ahUKEwj3gYniv8nZAhUPYVAKHRUtAMkQ6AEILjAB#v=onepage&q=risks%20associated%20with%20starting%20a%20business&f=false" (Accesed on 27th of February) </ref>

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, with respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===
If a company does not fall within any law or regulations, it in theory means that their product or service can be marketed and sold freely. However, this involves numerous risks, since regulation can be implemented at any time. This can cause serious consequences in different ways.

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. Although this in some cases can be viewed positively, since only part of the company is affected, it can also result in high legal costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become so. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs with money laundering. <ref> "https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf" (Accessed on 23rd of February) </ref>

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized. <ref> "https://www.ache.org/pdf/secure/gifts/Harrison_Chapter5.pdf" (Accessed 15th of February) </ref>

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks.

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company.

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product.

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks.

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the countries legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally create a BMC/project canvas, with a business model that facilitates the threats identified in the two previous analysis.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T21:04:06Z

S175507: /* Risks associated with unregulated markets */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref>"https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf",(Accessed on 28th of February) </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>"https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty",(Accessed on 28th of February) </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref>"https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf" (Accessed on 20th of February) </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very sensitive to both external and internal forces due to the sheer amount of uncertainties and unknowns when setting up a company. In many instances start-ups will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one of the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus the financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as rising raw material prices or facility rents.

=== Market risks ===
In order for a start-up to make a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the number of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out-compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lie within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulations your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change their business model or start a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risk associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted with respect to handling their time while at work as well as not stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.
<ref> "https://books.google.dk/books?id=9Kvv2Yv67jYC&pg=PA9&dq=risks+associated+with+starting+a+business&hl=da&sa=X&ved=0ahUKEwj3gYniv8nZAhUPYVAKHRUtAMkQ6AEILjAB#v=onepage&q=risks%20associated%20with%20starting%20a%20business&f=false" (Accesed on 27th of February) </ref>

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, with respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===
If a company does not fall within any law or regulations, it in theory means that their product or service can be marketed and sold freely. However, this involves numerous risks, since regulation can be implemented at any time. This can cause serious consequences in different ways.

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. Although this in some cases can be viewed positively, since only part of the company is affected, it can also result in high legal costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become so. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs with money laundering. <ref> "https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf" (Accessed on 23rd of February) </ref>

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized.

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks.

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company.

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product.

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks.

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the countries legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally create a BMC/project canvas, with a business model that facilitates the threats identified in the two previous analysis.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T21:02:13Z

S175507: /* Risks associated with unregulated markets */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref>"https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf",(Accessed on 28th of February) </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>"https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty",(Accessed on 28th of February) </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref>"https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf" (Accessed on 20th of February) </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very sensitive to both external and internal forces due to the sheer amount of uncertainties and unknowns when setting up a company. In many instances start-ups will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one of the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus the financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as rising raw material prices or facility rents.

=== Market risks ===
In order for a start-up to make a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the number of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out-compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lie within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulations your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change their business model or start a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risk associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted with respect to handling their time while at work as well as not stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.
<ref> "https://books.google.dk/books?id=9Kvv2Yv67jYC&pg=PA9&dq=risks+associated+with+starting+a+business&hl=da&sa=X&ved=0ahUKEwj3gYniv8nZAhUPYVAKHRUtAMkQ6AEILjAB#v=onepage&q=risks%20associated%20with%20starting%20a%20business&f=false" (Accesed on 27th of February) </ref>

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, in respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling a products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. All though this in some cases can be viewed positively, since only part of the company is affected, it can also result in high lawyer costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs white wash their money. <ref> "https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf" (Accessed on 23rd of February) </ref>

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized.

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks.

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company.

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product.

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks.

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the countries legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally create a BMC/project canvas, with a business model that facilitates the threats identified in the two previous analysis.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T21:00:38Z

S175507: /* Risks associated with start-ups */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref>"https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf",(Accessed on 28th of February) </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>"https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty",(Accessed on 28th of February) </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref>"https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf" (Accessed on 20th of February) </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very sensitive to both external and internal forces due to the sheer amount of uncertainties and unknowns when setting up a company. In many instances start-ups will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one of the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus the financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as rising raw material prices or facility rents.

=== Market risks ===
In order for a start-up to make a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the number of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out-compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lie within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulations your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change their business model or start a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risk associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted with respect to handling their time while at work as well as not stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.
<ref> "https://books.google.dk/books?id=9Kvv2Yv67jYC&pg=PA9&dq=risks+associated+with+starting+a+business&hl=da&sa=X&ved=0ahUKEwj3gYniv8nZAhUPYVAKHRUtAMkQ6AEILjAB#v=onepage&q=risks%20associated%20with%20starting%20a%20business&f=false" (Accesed on 27th of February) </ref>

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, in respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling a products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. All though this in some cases can be viewed positively, since only part of the company is affected, it can also result in high lawyer costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs white wash their money.

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized.

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks.

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company.

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product.

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks.

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the countries legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally create a BMC/project canvas, with a business model that facilitates the threats identified in the two previous analysis.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T20:59:44Z

S175507: /* Human risks */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref>"https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf",(Accessed on 28th of February) </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>"https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty",(Accessed on 28th of February) </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref>"https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf" (Accessed on 20th of February) </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very fragile to both external and internal forces due to the sheer amount of uncertainties and unknowns that are when setting up a company. In many instances they will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks that can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one, if not the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as raw material prices or facility rent increasing.

=== Market risks ===
In order for a start-up to gain a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the amount of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lies within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulation that your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change the business model or starting a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risk associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted with respect to handling their time while at work as well as not stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.
<ref> "https://books.google.dk/books?id=9Kvv2Yv67jYC&pg=PA9&dq=risks+associated+with+starting+a+business&hl=da&sa=X&ved=0ahUKEwj3gYniv8nZAhUPYVAKHRUtAMkQ6AEILjAB#v=onepage&q=risks%20associated%20with%20starting%20a%20business&f=false" (Accesed on 27th of February) </ref>

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, in respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling a products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. All though this in some cases can be viewed positively, since only part of the company is affected, it can also result in high lawyer costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs white wash their money.

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized.

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks.

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company.

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product.

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks.

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the countries legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally create a BMC/project canvas, with a business model that facilitates the threats identified in the two previous analysis.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T20:56:04Z

S175507: /* What are risks? */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref>"https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf",(Accessed on 28th of February) </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>"https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty",(Accessed on 28th of February) </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref>"https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf" (Accessed on 20th of February) </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very fragile to both external and internal forces due to the sheer amount of uncertainties and unknowns that are when setting up a company. In many instances they will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks that can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one, if not the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as raw material prices or facility rent increasing.

=== Market risks ===
In order for a start-up to gain a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the amount of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lies within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulation that your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change the business model or starting a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risks associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted in respect to handling their time while at work as well as stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, in respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling a products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. All though this in some cases can be viewed positively, since only part of the company is affected, it can also result in high lawyer costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs white wash their money.

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized.

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks.

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company.

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product.

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks.

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the countries legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally create a BMC/project canvas, with a business model that facilitates the threats identified in the two previous analysis.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T20:55:51Z

S175507: /* Uncertainties vs. Unknowns */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref>"https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf",(Accessed on 28th of February </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>"https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty",(Accessed on 28th of February) </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref>"https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf" (Accessed on 20th of February) </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very fragile to both external and internal forces due to the sheer amount of uncertainties and unknowns that are when setting up a company. In many instances they will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks that can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one, if not the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as raw material prices or facility rent increasing.

=== Market risks ===
In order for a start-up to gain a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the amount of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lies within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulation that your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change the business model or starting a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risks associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted in respect to handling their time while at work as well as stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, in respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling a products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. All though this in some cases can be viewed positively, since only part of the company is affected, it can also result in high lawyer costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs white wash their money.

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized.

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks.

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company.

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product.

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks.

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the countries legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally create a BMC/project canvas, with a business model that facilitates the threats identified in the two previous analysis.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T20:55:22Z

S175507: /* Uncertainties vs. Unknowns */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref>"https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf",(Accessed on 28th of February </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too.<ref>"https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty",(Accessed on 28th of February </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref>"https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf" (Accessed on 20th of February </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very fragile to both external and internal forces due to the sheer amount of uncertainties and unknowns that are when setting up a company. In many instances they will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks that can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one, if not the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as raw material prices or facility rent increasing.

=== Market risks ===
In order for a start-up to gain a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the amount of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lies within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulation that your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change the business model or starting a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risks associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted in respect to handling their time while at work as well as stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, in respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling a products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. All though this in some cases can be viewed positively, since only part of the company is affected, it can also result in high lawyer costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs white wash their money.

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized.

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks.

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company.

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product.

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks.

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the countries legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally create a BMC/project canvas, with a business model that facilitates the threats identified in the two previous analysis.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T20:55:05Z

S175507: /* What are risks? */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary losses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. Risks are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endeavour. <ref>"https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf",(Accessed on 28th of February </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is missing information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Unlike from uncertainties, unknowns refer to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and greatly impact companies across the globe, since the risks and consequence are also unknown to the concerned person too. ]<ref>"https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty",(Accessed on 28th of February </ref>.

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.
<ref>"https://www.actuariesindia.org/downloads/gcadata/10thGCA/Uncertainity%20in%20GI%20&%20Solvency%20Issues_PI%20Majmudar.pdf" (Accessed on 20th of February </ref>.

==Risks associated with start-ups ==
When a new business is starting up it is very fragile to both external and internal forces due to the sheer amount of uncertainties and unknowns that are when setting up a company. In many instances they will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks that can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one, if not the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as raw material prices or facility rent increasing.

=== Market risks ===
In order for a start-up to gain a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the amount of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lies within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulation that your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change the business model or starting a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risks associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted in respect to handling their time while at work as well as stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, in respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling a products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. All though this in some cases can be viewed positively, since only part of the company is affected, it can also result in high lawyer costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs white wash their money.

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized.

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks.

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company.

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product.

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks.

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the countries legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally create a BMC/project canvas, with a business model that facilitates the threats identified in the two previous analysis.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T19:51:50Z

S175507: /* Refferences */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary loses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. However, in more recent literature it has become present, that risks are also opportunities gain the aforementioned values. Risk are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endower. <ref>"https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf",(Accessed on 28th of February </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is lacking information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by, reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Different from uncertainties, unknowns refers to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and highly impacts companies across the globe, since the risks and consequence are also unknown to the concerned person too. [https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty]

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.

==Risks associated with start-ups ==
When a new business is starting up it is very fragile to both external and internal forces due to the sheer amount of uncertainties and unknowns that are when setting up a company. In many instances they will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks that can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one, if not the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as raw material prices or facility rent increasing.

=== Market risks ===
In order for a start-up to gain a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the amount of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lies within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulation that your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change the business model or starting a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risks associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted in respect to handling their time while at work as well as stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, in respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling a products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. All though this in some cases can be viewed positively, since only part of the company is affected, it can also result in high lawyer costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs white wash their money.

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized.

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks.

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company.

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product.

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks.

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the countries legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally create a BMC/project canvas, with a business model that facilitates the threats identified in the two previous analysis.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

<references/>

Managing start-ups in Unregulated Markets

2018-02-28T19:51:25Z

S175507: /* What are risks? */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary loses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. However, in more recent literature it has become present, that risks are also opportunities gain the aforementioned values. Risk are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endower. <ref>"https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf",(Accessed on 28th of February </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is lacking information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by, reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Different from uncertainties, unknowns refers to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and highly impacts companies across the globe, since the risks and consequence are also unknown to the concerned person too. [https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty]

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.

==Risks associated with start-ups ==
When a new business is starting up it is very fragile to both external and internal forces due to the sheer amount of uncertainties and unknowns that are when setting up a company. In many instances they will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks that can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one, if not the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as raw material prices or facility rent increasing.

=== Market risks ===
In order for a start-up to gain a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the amount of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lies within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulation that your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change the business model or starting a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risks associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted in respect to handling their time while at work as well as stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, in respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling a products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. All though this in some cases can be viewed positively, since only part of the company is affected, it can also result in high lawyer costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs white wash their money.

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized.

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks.

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company.

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product.

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks.

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the countries legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally create a BMC/project canvas, with a business model that facilitates the threats identified in the two previous analysis.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

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Managing start-ups in Unregulated Markets

2018-02-28T19:51:02Z

S175507: /* What are risks? */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary loses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. However, in more recent literature it has become present, that risks are also opportunities gain the aforementioned values. Risk are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endower. "https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf",(Accessed on 28th of February </ref>.

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is lacking information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by, reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Different from uncertainties, unknowns refers to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and highly impacts companies across the globe, since the risks and consequence are also unknown to the concerned person too. [https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty]

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.

==Risks associated with start-ups ==
When a new business is starting up it is very fragile to both external and internal forces due to the sheer amount of uncertainties and unknowns that are when setting up a company. In many instances they will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks that can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one, if not the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as raw material prices or facility rent increasing.

=== Market risks ===
In order for a start-up to gain a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the amount of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lies within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulation that your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change the business model or starting a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risks associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted in respect to handling their time while at work as well as stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, in respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling a products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. All though this in some cases can be viewed positively, since only part of the company is affected, it can also result in high lawyer costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs white wash their money.

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized.

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks.

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company.

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product.

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks.

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the countries legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally create a BMC/project canvas, with a business model that facilitates the threats identified in the two previous analysis.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

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User-Centered Design

2018-02-28T19:49:49Z

S175507: /* Abstract */

==Abstract==

As technology and services advance and become more deeply integrated in the daily live of their customers and therefore human lives, the different development processes and projects need to ensure that the offered solutions become more intuitive and user-friendly in order to secure customer satisfaction and stable sales. While taking a closer look on classical development models e.g. Waterfall model, it is clear that during the different project stages the focus of the project managers are only project related and mostly not viewed from an end customer perspective, which can cause usage and understanding problems<ref name="Gould">Gould, J. D. & Lewis, C. ''Designing for Usability: Key Principles and What Designers Think'', "https://www.research.ibm.com/compsci/spotlight/hci/p300-gould.pdf",(Accessed on 28th of February </ref>.

The User-Centered Design Approach takes these problems into consideration. The goal is to design understandable and enjoyable solutions for the end customers, while either taking their personal opinions into account or lead the project from an end customer optimized view. Therefore the different processes must be lead towards a user's needs, abilities and expectations in order to guarantee a maximized customer focus. The UCD process consists of five steps, of which the last 4 are following a interative logic. Furthermore, the UCD is defined in the DIN EN ISO 9241-210 "Human-centred design for interactive systems " standard<ref name="Human-centred design for interactive systems">''Human-centred design for interactive systems'', "https://www.beuth.de/en/standard/din-en-iso-9241-210/135399380",(Accessed on 28th of February) </ref>.

==Characteristics & Principles ==

The UCD concept was first mentioned by Donald Norman in his publication "User-Centered System Design: New Perspectives on Human-Computer Interaction" in 1986 and further discussed in his book "The Design of Everyday Things"<ref name="Norman"> Norman D. A. ''User-Centered System Design: New Perspectives on Human-Computer Interaction'', (CRC Press, 1986) </ref> <ref name="Norman2"> Norman D. A. '' The Design of Everyday Things: Revised and Expanded Edition'', (Basic Books, 2013) </ref>. Norman shows the importance of a users need in a product and the mistakes caused by unappropriate designs, which aren't user focused and don't take these into account. Therefore he gives recommendations based on the users needs and wishes.

In order to reach a high level of usability the following principles must be followed as defined by Gould and Lewis in 1985<ref name="Gould">Gould, J. D. & Lewis, C. ''Designing for Usability: Key Principles and What Designers Think'', "https://www.research.ibm.com/compsci/spotlight/hci/p300-gould.pdf",(Accessed on 28th of February </ref>.

* Iterative proceeding
* Early focus on user and task requirements
* empirical review of the designs by users

==User-Centered Design Process==

Having a closer look at classic development models shows that the focus of development does not respect the needs of the end users. As technologies advance and become more deeply integrated into human lifes, products or services must become more intuitive and user-friendly. Therefore, the goal is to design easy-to-learn and easy-to-use interactive products that provide the user with an optimal interface and an enjoyable user experience. For this, the development process must be geared towards the users and their needs, abilities and expectations must be taken into account<ref name="Beier">Beier, M. ''Usability'',(Springer Berlin Heidelberg, 2002) </ref>. These criteria are fulfilled by the User Centered Design approach. Through the usage of the UCD developments of a wide range of products and services are conceivable. Principles of the approach are an iterative proceeding, an early focus on user and organizational requirements and the empirical verification of users' designs<ref name="Gould">Gould, J. D. & Lewis, C. ''Designing for Usability: Key Principles and What Designers Think'', "https://www.research.ibm.com/compsci/spotlight/hci/p300-gould.pdf",(Accessed on 28th of February </ref>. The UCD process is presented in the standard DIN EN ISO 9241-210: 2011 " Human-centred design for interactive systems." Since the development of a human-friendly product is in the foreground, the term "human-centered design" is used. The procedure with five distinct phases essentially characterizes the process, whose phases are shown in Figure 1.

[[File:Iso USD.jpeg|600px|thumb|right|Own figure based on DIN EN ISO 9241-210 " Human-centred design for interactive systems" ]]

The user-centered design (UCD) design process for interactive systems according to ISO consists of five steps, of which the steps two through five are iterative. Since UCD can also be used to manage projects besides the development of interactive systems, the five phases according to ISO can be used by project managers of every kind. The following is a detailed description of the procedure.

====Step 1: Identify need for human-centered design====

UCD activities should play a central role as a guiding principle in all areas of project or product development. An involvement of all project members is important in order to avoid conflicts and to achieve an integration into all previous processes. A first meeting of all persons involved in the development represents the start of the UCD process. During this meeting general questions about the use of the product or the service should be answered.

====Step 2: Understand and specify the context of use====

The understanding and definition of the context of use is a central point in the UCD. Collecting information about the future users, their wishes and needs must be essential<ref name="Fischer">Fischer, T., & Postert, D. ''USER-CENTERED DESIGN'', "http://www.mittelstand-digital.de/MD/Redaktion/DE/PDF/user-centered-design,property=pdf,bereich=md,sprache=de,rwb=true.pdf",(Accessed on 28th of February) </ref>. In order to get to know the potential users, the use of an audience analysis is conceivable. This should result in a concrete distinction between different target groups from the mass of all users. Attributes help in the division into different groups. These may be demographic characteristics, such as age or gender, socioeconomic as well as education and occupation and psychological characteristics and attitudes and values. The data can be used as a first source for creating personas.
The execution of a task analysis is conceivable as the next step<ref name="Fischer">Fischer, T., & Postert, D. ''USER-CENTERED DESIGN'', "http://www.mittelstand-digital.de/MD/Redaktion/DE/PDF/user-centered-design,property=pdf,bereich=md,sprache=de,rwb=true.pdf",(Accessed on 28th of February) </ref>. Here, the tasks that are important for the achievement of the objectives are broken down into small sub-steps and the sequence of orders and their execution conditions are analyzed<ref name="Fischer">Fischer, T., & Postert, D. ''USER-CENTERED DESIGN'', "http://www.mittelstand-digital.de/MD/Redaktion/DE/PDF/user-centered-design,property=pdf,bereich=md,sprache=de,rwb=true.pdf",(Accessed on 28th of February) </ref>. In this case, the result may represent, for example, in a hierarchy of goals up to the smallest steps required to solve the request.
Last but not least, the analysis of the work or application environment may be an option. Many systems are exposed to very different environmental conditions, e.g. large temperature differences. In the environmental analysis, it is important to record all significant environmental influences, thus a system can be designed that works flawlessly under all expected environmental influences.

====Step 3: Specify the user and organizational requirements====

The determination of the usage requirements and thus the development of requirements for the use of the product or the service refer to the requirements of the users including the usage context defined in the previous step.
In terms of content, these refer to the requirements of the users and thus exceed the descriptions of purely functional aspects<ref name="Fischer">Fischer, T., & Postert, D. ''USER-CENTERED DESIGN'', "http://www.mittelstand-digital.de/MD/Redaktion/DE/PDF/user-centered-design,property=pdf,bereich=md,sprache=de,rwb=true.pdf",(Accessed on 28th of February) </ref>.
Realistic use cases help to integrate the personas into lifelike user experiences, whereby the involvement of personas in them realistically describes how to perform a specific task and what motivates the user to perform a task.

====Step 4: Produce design solutions====

Following the elaboration of the context of use and the user requirements, first solutions of the future product will be developed during this step<ref name="Fischer">Fischer, T., & Postert, D. ''USER-CENTERED DESIGN'', "http://www.mittelstand-digital.de/MD/Redaktion/DE/PDF/user-centered-design,property=pdf,bereich=md,sprache=de,rwb=true.pdf",(Accessed on 28th of February) </ref>.
These are realized in different prototypes for visualization but also for evaluation. At the beginning, cost-effective and low-effort prototypes are presented to the customer, such as paper prototypes or simple forms on a screen. Customer wishes can be implemented quickly and easily. As development progresses, the prototypes become more and more similar to the final product. Functionalities and structure of the product approach the final version and thus implement findings from previous versions.

====Step 5: Evaluate designs against requirements====

In order to optimally integrate the wishes and needs of the customers into the process, prototypes should be tested and evaluated by them early on.
Evaluation in development is one of the key points of the UCD process<ref name="Fischer">Fischer, T., & Postert, D. ''USER-CENTERED DESIGN'', "http://www.mittelstand-digital.de/MD/Redaktion/DE/PDF/user-centered-design,property=pdf,bereich=md,sprache=de,rwb=true.pdf",(Accessed on 28th of February) </ref>.
At the outset, it is conceivable to carry out an expert evaluation, whereby a trained expert, who as yet has had as little involvement as possible in the previous development steps, evaluates the system from the point of view of a persona and documents problems that occur in the design solutions. A controlled testing with people from the targeted user group represent the standard of development,
Once the design solution meets all user requirements, the process is completed and the product or service is fully developed.

== Analysis Tools==
There are a lot of tools which can be used during a UCD project to optimize the outcomes and goals. All of them try to help the project team to slip into the role of an user and understand its needs and wishes regarding a product. In the following three important Tools are described, while still a lot of tools as scenarios, use cases etc. could be mentioned.

====Personas====

After a closer look at the UCD method, it is obvious that it is suitable for organizing a customer-oriented development. In the worst case of a development, companies rely on their own experiences when developing new products or services. Thus, these products and services for already known users would be developed, which one imagines in their own target group. Alternatively, one selects target groups from a variety of data, which come from the fact-based data in the format "age", "income" or "marital status"<ref name="Zeidler">Zeidler, S. '' In 6 Schritten zur eigenen Persona'', "https://www.gruenderszene.de/operations/persona-personas-entwickeln",(Accessed on 28th of February) </ref>. A grouping that is understandable for all employees is often difficult, as they are also difficult to apply in projects and difficult to communicate in a team. In addition, different images of the respective target group and their needs and wishes arise. Persona development is an interesting option to analyze and exploit these needs of the end user or target group during the course of the UCD.

The so-called personas represent archetypically users of products or services that address a specific target group and their needs, interests and interests reflect wishes. These are based on analysis, testing and observations, or are developed from existing information to influence decisions for a particular process or long-term decisions from the customer's perspective<ref name="Zeidler">Zeidler, S. '' In 6 Schritten zur eigenen Persona'', "https://www.gruenderszene.de/operations/persona-personas-entwickeln",(Accessed on 28th of February) </ref>.
In addition, they help companies to understand, describe and identify functionalities of their target groups and to optimize processes and products of the company in a customer-oriented manner<ref name="Zeidler">Zeidler, S. '' In 6 Schritten zur eigenen Persona'', "https://www.gruenderszene.de/operations/persona-personas-entwickeln",(Accessed on 28th of February) </ref>.
The founder of the Persona method was Allen Cooper in the early 1980s. Long loading times and confusing user interfaces disrupted his everyday life decisively.

Through the use of fictional characters, which reflected the needs of future users, it was possible for him to "translate" into the user. Cooper developed with this method some programs in which he developed personas for each user group. For the time being, he gave Personas only a name and a goal, which the user wanted to achieve with the use of the program. In 1998 he published the book "The inmates are running the asylum", in which he presented his persona method to the world public<ref name="Cooper">Cooper, A. '' The Inmates Are Running the Asylum: Why High Tech Products Drive Us Crazy and How to Restore the Sanity'', (Sams Publishing,1998) </ref>. At the present time, the Persona method is not only used in software development, but also in other disciplines such as computer science or marketing and sales.

The descriptions of the properties of personas are usually very similar in contemporary literature, but sometimes differ in the details. Goodwin's description, however, captures many similarities and will be explained in more detail below. Figure 2 shows a persona from Kim Goodwin's book "Designing for the Digital Age"<ref name="Goodwin">Goodwin, K. '' Designing for the Digital Age: How to Create Human-Centered Products and Services'', ( John Wiley & Sons, 2009) </ref>.

[[File:Persona.png|450px|thumb|right|Exemplary presentation of a persona after K. Goodwin (Source: Goodwin, 2009.) ]]

One of the most important elements of a persona is the naming. Each persona should have a realistic first and last name, as this increases the authenticity of the persona and thus increases its value at the same time<ref name="Goodwin">Goodwin, K. '' Designing for the Digital Age: How to Create Human-Centered Products and Services'', ( John Wiley & Sons, 2009) </ref>. Using an authentic photo increases this value again. Names of people known by the team should not be used as they can otherwise create strong associations.
The persona should, if possible, include a description of their abilities, as well as information about technical know-how or the training background is helpful in planning the future use of a product or service<ref name="Goodwin">Goodwin, K. '' Designing for the Digital Age: How to Create Human-Centered Products and Services'', ( John Wiley & Sons, 2009) </ref>. The description of feelings, attitudes and expectations helps to translate even deeper into the persona. The question of which activities provide joy and which are particularly tedious is experienced by the development team.
In order to further increase the relation to reality, the use of demographic characteristics from field research is recommended.
The persona's behavior in certain questions, general frustrations and problems of the represented user group and descriptions of the usage environment complete the desired properties. In particular, the usage environment can be of great importance, as it can be important to understand the context of product usage.
Finally, it should be mentioned whether the persona interacts with other personas, products, and services, and how they involve the tasks of the persona. In addition, relationships and interactions with other personas can be linked and recorded, if they influence the usage behavior.

====Customer Journey Mapping====

The Toolbox's second tool is Customer Journey Mapping, or CJM in short. A customer who buys a service or a product of a company usually has several so-called contacts with areas and employees of a company that influence his or her perception. To increase customer satisfaction and build long-term customer relationships at the same time, this approach seeks to make a customer's "journey" as comfortable and hassle-free as possible<ref name="Janson">Janson, A. '' Der Kunde im Fokus: Das Konzept der Customer Journey'', ( GRIN Verlag, 2012) </ref>.
CJM enables a project team to recognize, track and describe various customer experiences that arise when using the product and thus describe the central aspects that form the basis for customer satisfaction<ref name="Ohtonen">Ohtonen, D. J. '' Customer Journey Mapping'', ( Bookboon, 2016) </ref>.
By deriving measures from the acquired knowledge conclusions can be drawn on the composition of the own portfolio and these can be adjusted to the customer.
In this case, the customer's journey can be described by the use of one or more Personas, which are particularly useful because they not only represent a whole audience. Additionally Personas allow the emotional attachment of the project team to an users wishes and needs, what makes the implementation easier than purely fictional characters.

The first step of a CJM development is the definition and focus on the customer group. Here, the Personas are used and represent the most important customer group<ref name="Zeidler2">Zeidler, S. '' Mit Customer-Journey-Mapping die Kundenzufriedenheit steigern'', "https://www.gruenderszene.de/allgemein/mit-customer-journey-mapping-die-kundenzufriedenheit-steigern",(Accessed on 28th of February) </ref>. In the second step, it is important to identify and document the various points of contact of the selected personas with the company. Here is to think of all points of contact, which may come into question. This also includes all points of contact before the purchase, but also all during the purchase and afterwards occurring.
In order to avoid a confusing and thus unusable CJ map, the third step is to focus on the so-called Moments of Truth. The Moments of Truth method describes the most important or insignificant contacts to the company from the customer's point of view with a simple point scale of one to five. The most important contacts for the customer are rated one, whereas the less important contacts are rated five. Consequently, in order to prioritize the points of contact, a focus is placed on the points with a rating of one to three<ref name="Zeidler2">Zeidler, S. '' Mit Customer-Journey-Mapping die Kundenzufriedenheit steigern'', "https://www.gruenderszene.de/allgemein/mit-customer-journey-mapping-die-kundenzufriedenheit-steigern",(Accessed on 28th of February) </ref>.
Subsequently, in the fourth step, an overview of the departments and persons with whom the customer comes into contact during the course of the CJM is provided. In addition, the documentation of possible internal problems, which could influence the customer satisfaction, is suitable.
In the fifth step, CJM, the evaluation of the individual points of contact along the customer journey is to be assessed from the customer's point of view. On an scale of one to ten, an objective assessment will be made, which may be based on analyzes and figures. If none of these are available, surveys of employees involved in the touchpoints or customer surveys are also useful. The number ten describes exceeded expectations, whereas the number 1 represents the opposite of these.
The central step of the method is the graphical representation of the customer journey. This step can be implemented in different variations, but most solutions have a similar structure. The Y-axis of the graph shows customer satisfaction, whereas the X-axis describes the duration of the trip. An example presentation might look like Figure 3.

[[File:CJM.jpeg|600px|thumb|right|Own figure of a Customer Journey Map after Zeidler, 2010. ]]

With the creation of the CJ Map the process is almost finished. It is now necessary to gain the knowledge gained and to develop concrete suggestions for improvement and to optimize processes. Changes can be made internally, e.g. by extending the authority of employees, or externally, e.g. through the optimization of advertising content.
After a pre-defined period, the effectiveness of the strategies should be evaluated and their effectiveness reviewed. This can happen on the one hand by comparison with the values before a conversion, but also by internal employee surveys.

====Jobs-to-be-done====

The idea of the job-to-be-done approach goes back to Ted Levitt's statement that customers do not want to buy a drill, but a hole in the wall<ref name="Levitt">Levitt, T. '' Marketing Myopia'', "https://razaleads.files.wordpress.com/2013/09/marketing-myopia_t_levitt.pdf",(Accessed on 28th of February) </ref>. Christensen, who developed the method to detect customer expectations, says that customers "hired" a product to do a job<ref name="Christensen">Christensen, C. M., & Raynor, M. E. '' The Innovator's Solution: Creating and Sustaining Successful Growth '', (Harvard Business School Press, 2003) </ref>. This is to show that a customer acquires the benefit of a product and not the product itself, but also the situational context of a use plays a crucial role. Therefore, this method is particularly useful in the context of the UCD and the use of personas to observe customer actions and understand their goals<ref name="Šáchová">Šáchová-Kleisli, A., & Walther, B. '' Job-to-be-done-Logik in der Praxis'', "http://www.vendbridge.com/files/V-Transformation-150414-DE-newlayout-inclCharts.pdf",(Accessed on 28th of February) </ref>.
A simple example is the optimization attempt of a fast-food manufacturer, who wanted to optimize his milkshake offer with the Jobs-to-be-done method, as classic analyzes could not succeed<ref name="Nobel">Nobel, C. '' Clay Christensen's Milkshake Marketing'', "http://hbswk.hbs.edu/item/clay-christensens-milkshake-marketing",(Accessed on 28th of February) </ref>.
Customer behavior was analyzed with the question "For which job are my products hired?" As a result of this research, the company found that the majority of Milkshake shoppers consisted of two groups, the first being the product as a pastime for a longer journey to work, and parents who bought the product as a dessert for their children.
Based on this knowledge, the product range could be optimized according to the needs and wishes of both groups. On the one hand the offering of thicker straws and the thinning of the shake to achieve a faster consumption of the children to reach on the other hand, the offer of milkshake varieties with small pieces to the pastime of the first group<ref name="Nobel">Nobel, C. '' Clay Christensen's Milkshake Marketing'', "http://hbswk.hbs.edu/item/clay-christensens-milkshake-marketing",(Accessed on 28th of February) </ref>.
Another advantage of jobs is their solution neutrality, whereas the tools used for their realization are subject to technological change.

==Advantages and Limitations==

====Advantages of User Centered Design====

* Increased sales through respecting user wishes and needs
* As users are part of a development process they feel as a part of the project team
* Less adjustments after a product is released
* Less user complaints about confusing usability
* Support savings as users are more likely to understand a product

====Disadvantages of User Centered Design====

* High development costs
* Time consuming development as user interacting takes a lot of time
* Difficult transition from user data into design
* Uncertain expectations to the real world use of products by a user
* No guarantee that a user sample will fit into the real world

==Annotated Bibliography==

''Cooper, A., The Inmates Are Running the Asylum: Why High Tech Products Drive Us Crazy and How to Restore the Sanity: Revised and Expanded Edition, Sams Publishing, 1998:'' In the book the author describes current software development behaviors and which problems occur by not focus on the endusers. Further it elaborates the importance of focusing on the needs of users and how to address these in the different development and design stages.

''Donald A. Norman, User-Centered System Design: New Perspectives on Human-Computer Interaction, CRC Press, 1986:'' The book introduces the User Centered Design approach to the worldwide audience and explains how the people focused approach can help programers to develop software for customer needs, abilities and wishes.

''Donald A. Norman, The Design of Everyday Things: Revised and Expanded Edition, Basic Books, 2013:'' The book is a continuation of the book "User-Centered System Design". It contains personal experience from the author Donald Norman, who gives examples from his working experiences at different multinational companies e.g. BMW or Apple in which he observed the importance of user focused development processes and projects. Further he describes how humans see and understand their (working) environment and works out how these insights can be used to optimize design processes.

''Goodwin, K., Designing for the Digital Age: How to Create Human-Centered Products and Services, John Wiley & Sons, 2009:'' The book provides tools, guides and references for human-centered projects. It contains a great collection of information regarding the complex UCD (HCD) approach which a clear and easy understandable language. As the book is not using the common complex language, the book can be read by any level of project managers.

== References ==

<references />

Managing start-ups in Unregulated Markets

2018-02-28T19:43:41Z

S175507: /* Risk assessment */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary loses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. However, in more recent literature it has become present, that risks are also opportunities gain the aforementioned values. Risk are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endower. [https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf]

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is lacking information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by, reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Different from uncertainties, unknowns refers to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and highly impacts companies across the globe, since the risks and consequence are also unknown to the concerned person too. [https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty]

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.

==Risks associated with start-ups ==
When a new business is starting up it is very fragile to both external and internal forces due to the sheer amount of uncertainties and unknowns that are when setting up a company. In many instances they will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks that can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one, if not the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as raw material prices or facility rent increasing.

=== Market risks ===
In order for a start-up to gain a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the amount of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lies within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulation that your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change the business model or starting a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risks associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted in respect to handling their time while at work as well as stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, in respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling a products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. All though this in some cases can be viewed positively, since only part of the company is affected, it can also result in high lawyer costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs white wash their money.

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized.

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks.

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company.

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product.

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks.

== Managing start-ups in unregulated markets ==
In conclusion it can be very demanding to set up a start-up, and there are many risks that must be considered before taking the step to become an entrepreneur. If in addition the start-up lies outside the countries legislation and regulation it can be hard to move on without the right financial backing. Therefore, a start-up in this field, must be properly prepared for these indices and be able to withstand an ever-changing environment. Furthermore, all aforementioned risks must be considered in order to ensure, that the business does not end up going bankrupt.

A way for a start-up to be prepared in these types of situations is to combine external and internal strategic planning models in order to consider all aspects necessary. Thus, starting the analysis with a SWOT to determine the overall external and internal forces. Then making a thorough PEST/PESTEL based on the SWOT to identify the exact threat in respect to the surrounding environment. Then finally create a BMC/project canvas, with a business model that facilitates the threats identified in the two previous analysis.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

Managing start-ups in Unregulated Markets

2018-02-28T19:42:57Z

S175507: /* PESTEL */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary loses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. However, in more recent literature it has become present, that risks are also opportunities gain the aforementioned values. Risk are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endower. [https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf]

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is lacking information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by, reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Different from uncertainties, unknowns refers to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and highly impacts companies across the globe, since the risks and consequence are also unknown to the concerned person too. [https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty]

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.

==Risks associated with start-ups ==
When a new business is starting up it is very fragile to both external and internal forces due to the sheer amount of uncertainties and unknowns that are when setting up a company. In many instances they will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks that can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one, if not the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as raw material prices or facility rent increasing.

=== Market risks ===
In order for a start-up to gain a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the amount of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lies within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulation that your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change the business model or starting a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risks associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted in respect to handling their time while at work as well as stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, in respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling a products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. All though this in some cases can be viewed positively, since only part of the company is affected, it can also result in high lawyer costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs white wash their money.

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized.

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|PESTEL analysis]]

==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks.

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company.

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product.

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

skriv et kort refeat om kilden

Managing start-ups in Unregulated Markets

2018-02-28T19:42:35Z

S175507: /* SWOT */

==Abstract ==
In these times where many new inventions and technologies are erupting, many start-ups will find themselves in a place where they are entering untouched, untested or unregulated markets. For these start-ups it can be hard to identify and manage the risks that are associated with their future business since there are many unknowns that must be considered. Through this article these risks will be assessed and analyzed in order to determine if traditional strategic management approaches and models are appropriate for start-ups in unregulated markets.

== What are risks? ==
Risks are often connected to a specific decision that can end up with a company or individual losing something of value. This includes both monetary loses such as money or customers but also non-monetary losses such as social status or emotional well-being. Therefore, companies will often have numerous measures in place to reduce these potential losses. However, in more recent literature it has become present, that risks are also opportunities gain the aforementioned values. Risk are often associated with entering an area of many uncertainties and unknowns that must be considered before undertaking any endower. [https://www.outdoored.com/sites/default/files/documents/files/wrmc_proceedings_05_adventure_cline.pdf]

===Uncertainties vs. Unknowns===
An uncertainty within industry refers to a process/project conducted or decision made under intangible circumstance i.e. where all information is not known by the concerned person. Uncertainties are caused in situations where data is only partially observable or if the project lies within a field where many values are stochastic and volatile. Uncertainties can often be hard to quantify as there is lacking information. Therefore, when dealing with this, one will often see companies relying on probabilities to assess the consequence of uncertainties. Practically this is done by, reviewing all the possible outcomes of this project and then determining the probability of them happening based on historical data, previous similar events or executive experience within the field. Different from uncertainties, unknowns refers to conducting a process/project or making a decision in an environment, where values are impossible to predict. Unknowns come in every shape and form, and highly impacts companies across the globe, since the risks and consequence are also unknown to the concerned person too. [https://hbr.org/2014/09/the-industries-plagued-by-the-most-uncertainty]

Uncertainties are for example found within the insurance field, since it can be hard to estimate the amount of injuries or illnesses that will occur to a person or company within one year and thus hard to determine the insurance cost. Here they highly rely on historical data to generate an estimate where they can ensure profitability. Unknowns are often seen in new, emerging and disruptive industries, since there is no historical data to predict e.g. the demand of a product.

==Risks associated with start-ups ==
When a new business is starting up it is very fragile to both external and internal forces due to the sheer amount of uncertainties and unknowns that are when setting up a company. In many instances they will not have the financial capabilities to ensure that all risks are taking care of before launching their business. Therefore, it is important to at least understand which risks that can occur in this process. In this section we will review the main risks associated with start-ups.

=== Financial risks ===
Financial risks are one, if not the most important risks when considering starting up a business. Purely start-up costs can often be very high and without any revenue or future purchase orders, this investment will have no security. Furthermore, starting up a company often consists of giving up the primary income source, thus financial stability. The aforementioned costs and consequences will often be known and therefore the start-up will have calculated the financial feasibility of these actions. However, other financial aspects can be unexpected, such as raw material prices or facility rent increasing.

=== Market risks ===
In order for a start-up to gain a profit, there must be enough sales to cover the operating costs. The products in a start-up will often have no historical data, and to make precise forecasts is almost impossible. This can cause a start-up to buy excessive raw materials for the amount of customers there is; there might be none. Another major risk for start-ups competing in red-ocean markets is that a competitor will out compete them on price, quality, functionality or geographic reach.

=== Legal and regulatory risks ===
All start-ups and all companies lies within some type of legislation, however when the core business is not law it can be difficult to identify which laws and regulation that your product or service falls under. For example a Danish start-up that sells fruit must adhere to the food law, health and safety law, employment law, marketing law, import law and many more. These risks can be reduced by doing the right research or using an external lawyer to adhere to correct laws before launching the business. However, laws and regulations can change, which can make it impossible for a start-up to continue business as is. For established companies, it is possible to change the business model or starting a different company, but for start-ups this can bankrupt their business.

=== Human risks ===
Another aspect that must be considered is the risks associated with hiring new employees. Firstly, the financial risks must be considered again, since it very costly to have employees in a business both in respect to salary but also benefits such as ‘holiday pay’ and pension. However, these costs are known before hiring a new employee and therefore the start-up will have calculated the financial feasibility of these actions.

A more intangible risk is that if he/she can be trusted in respect to handling their time while at work as well as stealing company money or equipment. Long term risks include that the employee will find a job in an established company in order to increase their salary.

==Risks associated with unregulated markets==
Not many products or services lie outside the ‘normal’ legislations and regulations that are present in European countries. However, innovative products that lie within the financial field, will often find themselves selling products or services that are not regulated. This is due to the structure and standardization, which needs to be in place when handling other people's money and investments. All the risks mentioned in ‘risk associated with start-ups’ are naturally also applicable for businesses operating in unregulated markets. However, in respect to legality, there are more aspects that should be considered.

=== Legal and regulatory risks ===

==== Freezing assets ====
The regulations might entail that the way the business is currently providing a service or selling a products is not legal anymore. This means if operations continue the government will freeze your assets. This is a major risk, since the suppliers, employees and third-party services still must be paid, however the company does not have any income.

==== Ruin the business model ====
As mentioned above, the new regulation might make a business ineligible to continue their business as is, which means that the giving company must rethink their business model. These changes can result in making the concept financially infeasible.

==== Global impact ====
Each country has its own legislation and regulations, and this means if the company is competing globally it can be affected differently in each country. All though this in some cases can be viewed positively, since only part of the company is affected, it can also result in high lawyer costs in each country.

==== Being suid ====
New regulation can cause the government or a third party company to sue the business. At the time of doing business the service or product was not illegal, however after new regulations, it has become. In some instances, this will cause the government to sue the company for e.g. helping illegal gangs white wash their money.

== Evaluating risks ==
The aforementioned risks are some of the most common endured in start-ups and companies in unregulated markets. Nevertheless, every company is different and the relevant risks associated with the business model must be assessed individually. A way to assess the risk involved in a business is using SWOT, PEST, PESTEL, BMC and PMC.

=== SWOT ===
SWOT stands for strengths, weaknesses, opportunities and threats and is strategic planning tool for companies. It used to identify internal and external factors that impact a business, a project or a product. The internal factors refer to strengths and weaknesses, since these emphasize which activities the company does well and which they could improve. The external factors are the opportunities and threats, since they represent factors, which the company itself cannot control.
[[File:SWOT123.png|500px|thumb|center|SWOT analysis]]
==== Risk assessment ====
Using SWOT as a risk assessment tool, one must focus on weaknesses and threats, since theses constitute the risks involved in the product or service. A product’s weaknesses are often factors that can be improved and therefore a company can often follow a straight path to remove these risks. Threats are more difficult to act upon, since they are out of your control. However, when threats are identified, a company will have the opportunity to ensure that the consequences are minimized.

=== PEST ===
Pest stands for political, economic, social and technology and is a strategic planning tool for companies. Different from SWOT, PEST only considers external factors when evaluating a business, a project or a product. It used to determine in what environment the business lays within in respect the four aforementioned areas. Political refers to how the government impacts the businesses economy e.g tariffs and taxes. Economic refers to how the economy in giving area is and includes factors such as economic growth, gross domestic product(GDP) and inflation. Social refers to demographics of the area and could be average age or sleeping habits. Lastly, technology refers to at what rate the technology is changing in the area and is often specific for each industry.
==== PESTEL ====
PEST is not comprehensive enough for many industries, thus for some projects, product or business PESTEL must be applied, which includes an environmental and legal aspect. These aspects allow a company to dig even deeper into the surrounding environment. Legal refers to the laws in the area such as marketing and competition laws. Environmental refers to the ecological aspects such as the weather or climate.
[[File:PESTEL.png|900px|thumb|center|alt text]]
==== Risk assessment ====
As PEST and PESTEL only investigates external factors, it is a very useful tool to identify which areas a company should focuses it risks reduction measure in. It can be very time consuming to make a comprehensive analysis for each factor. Therefore, companies can advantageously start by creating a SWOT, and then based on that decide which factors are relevant to dig deeper into. With the volatility of the current world and market PEST are becoming increasingly necessary when determining external risks.

=== BMC ===
The Business Model Canvas is a strategic tool often used by start-ups. It is used to visualize a company’s partners, activities, value proposition, resources, customer relationship, marketing channels, customer segment, cost structure and revenue streams. It allows the company to get an overview of all activities and procedures needed to sell their product to a customer. Different from the previous models, the focus BMC is internally in the company.

==== Project Canvas ====
The Project Canvas is very similar to BMC and describes the project's purpose, scope, success criteria, milestones, actions, teams, stakeholder, resources, constraints, risks and outcome. Different from BMC this model includes external factors such as constraints and risk. It is mainly designed to manage projects, however due to the generality of the aspect it would also be applicable to a company as a whole or a single product.

==== Risk assessment ====
BMC and project canvas are designed to be used when beginning a project or company. Their emphasis is therefore on the strengths of the company, instead of what weaknesses they have. Within risk assessment they both lack a comprehensive analysis of external forces that impact the business. It would therefore be beneficial to either combine BMC/project canvas with either a PEST or PESTEL to incorporate these risks.

==Refferences==
Morgan, Peter. (2009) Unregulated Entities, Products, and Markets: Challenges for Monitoring and Regulations https://www.adb.org/sites/default/files/publication/157271/adbi-rpb30.pdf[1]

Manktelow, James. (1996) SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. [online] https://www.mindtools.com/pages/article/newTMC_05.htm[2]

Further reading section,

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Managing start-ups in Unregulated Markets