What is Risk vs. Reward?

Answer:
Risk vs. Reward is a common mindset in Business

and often refers to the level of risk associated with a business activity. You may hear the phrase, "Without risk there is no reward" but in Business terms and more specifically Businesses that have a fiduciary responsibility to their shareholders risk needs to be managed effectively.

Certain activities can be considered more risky that others, thus they potentially have higher rewards. Such activities can include mergers and acquisitions or major project build outs. The level of risk an entity is willing to take is usually a function of what percentage the expenses are associated with that risk with regards to the companies overall bottom line.

For example, a company that nets $500,000 a year will find a $300,000 advertising campaign an extremely risky proposition. The rewards could prove to be worthy but knowing that the expenses are so large in comparison to the companies net makes this very risky. On the other hand, a $300,000 advertising campaign for Google is pocket change. Though the proposition is risky, it will not effect the bottom line of the company thus the risk isn't realized as much as for the smaller company.

Often times, Entrepreneurs are more likely to assume more risk when dealing with a project or expense. If you can realize the potential reward and have fully done your due diligence then you may think the rewards outweigh the risks.