Risk & Reward is the balance between the potential for a negative outcome (risk) and the potential for a positive outcome (reward).
Decision: To launch an innovative, new-to-market product. High Risk: The market may not want the product, development costs are high, and the business could lose a lot of money if it fails. High Reward: If successful, the business could dominate a new market, achieve rapid growth, and make huge profits (e.g. Apple with the first iPhone).
Decision: To enter a new international market. High Risk: The business doesn't understand the local culture, faces new competitors, and could misjudge the market, leading to losses. High Reward: The business could gain access to millions of new customers and significantly increase its sales and profits (e.g. Tesco's failed entry into the USA vs. its success in other markets).
Risk Vs Reward — Attitude to Risk
The willingness to accept the risk/reward trade-off is not the same for every business or entrepreneur — it depends on their attitude to risk.
Risk Averse: A small, family-run business whose main objective is survival and providing a stable income for the family will likely be risk-averse. They will prefer safer decisions with lower, but more predictable, rewards.
Risk Seeking: A venture capital-backed technology start-up using AI whose objective is rapid growth will likely be risk-seeking. They are willing to 'bet the farm' on a high-risk strategy in the hope of achieving a huge reward for their investors.
Real-World Case Studies
Ocado and Kroger — a high-reward bet that partly unravelled
In 2018, Ocado signed a deal to build up to 20 robotic warehouses for US grocer Kroger — a high-risk, high-reward international expansion. By December 2025, Kroger closed three of the live warehouses and cancelled a planned fourth, citing a change in strategy, though Ocado did receive a $350 million compensation payment. Ocado's share price had fallen more than 90% from its 2020 peak by mid-2026. This shows that even a reward-focused decision, backed by a major partner, can carry risk that only becomes clear years later.
Source: verified via search, September 2026 — Reuters and market coverage of Ocado-Kroger.
BrewDog's Equity for Punks — reward for early investors, risk crystallising later
BrewDog's "Equity for Punks" crowdfunding, launched in 2009, gave over 200,000 investors a stake in a fast-growing craft brewer — a rewarding bet during BrewDog's rapid growth years. However, in 2026 the company's UK operations entered administration, and some investors — including one who put in £12,000 — faced losing their entire investment. This illustrates that risk in a business decision doesn't disappear once a reward has been enjoyed for a period; it can still materialise later.
Source: verified via search, September 2026 — BBC coverage of BrewDog's 2026 administration and sale.
Quick Knowledge Check
Short, snappy recall questions — tap to reveal the answer.
What does 'risk averse' mean? (1 mark)
Preferring safer decisions with lower but more predictable rewards.
State one potential reward of entrepreneurship. (1 mark)
Any one of: financial gain, autonomy, sense of achievement.
State one potential risk of entrepreneurship. (1 mark)
Any one of: financial loss, stress and long hours, uncertainty of income.
Sort It: Risk vs Reward
From the lesson's own risk/reward examples — tap a statement below, then tap the bucket it belongs in.
⚠️ Risk
🏆 Reward
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Matching Activity
Tap a term, then tap its matching definition.
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Key Term Flashcards
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Tap a card to flip it, then rate yourself.
Risk
The potential for a negative outcome from a business decision.
Reward
The potential for a positive outcome from a business decision.
Trade-off
Sacrificing one thing (e.g. safety) to gain another (e.g. higher potential profit).
Risk averse
Preferring safer decisions with lower, more predictable rewards.
A*/A Stretch
Synoptic link
Connecting to finance: A business's attitude to risk connects to its sources of finance (3.1.4). A risk-seeking, venture-capital-backed business often uses equity finance, where investors share the risk in exchange for a stake in future rewards, whereas a risk-averse family business might avoid debt finance to limit its exposure to fixed repayments if a decision doesn't pay off.
Examiner's eye
Avoid treating "risk" and "reward" as always equal and opposite. A strong evaluative answer recognises that the SIZE of the risk and the SIZE of the reward aren't always proportional — Ocado took on years of capital-intensive risk for a reward (the Kroger partnership) that ultimately delivered less than originally hoped, which is a more nuanced point than "high risk = high reward" as a blanket rule.
Try This With AI
Before using this: AI tools can get facts or mark scheme details wrong, and quality varies by tool. Always check anything factual against your notes or ask your teacher.
Give me three different UK business decisions with varying levels of risk. Ask me to rank them from lowest to highest risk, explain my reasoning for each, and then challenge my weakest justification.