Risk, enterprise and innovation

My business is all about risk.  This may surprise readers – and I often get puzzled expressions when I say it.  My job is to understand, assess and communicate the political risks of other countries and try to manage them so that they don’t damage my country’s interests.

Risk is about the uncertainty of outcomes – results, consequences or, if you like, events.  You don’t know with certainty what is going to happen, nor can you control everything.  Sometimes you have to take a risk to achieve the result that you want.

There is a business of providing political risk insurance for companies that want to insure against the possibility of unrest or other political events, that may result in a loss.  Lloyds of London, the insurance market, can provide such cover.

As I’ve written before, we diplomats tend to inhabit our own “world” – sometimes known as the “diplomatic circuit”.  Much of our activity is interacting with diplomats of other countries as we test out the limits to the “risk tolerance” (to continue with my analogy) of each other’s governments.

I’ve been in a very different “world” this week, whose inhabitants are also very much focussed on risk.  But rather than identifying, analysing or explaining them to others, their world is much more about taking risks.

This is the world of entrepreneurs.

This week is Global Entrepreneurship Week, and I took part in the opening in Minsk.  Although the economy is dominated by state enterprises, there is a vibrant IT sector in Belarus.  With relatively low start-up costs and global reach through the internet, entrepreneurs for IT products and applications have enormous possibilities.

In recent years, Britain has undergone a major change in attitude towards enterprise.

In the nineteenth century and the first decade of the twentieth century, we were the richest country in the world, thanks to being the cradle of the industrial revolution.  Our products, especially textiles and machinery, dominated world trade, and we built up a world empire.

That pre-eminence slowly dissipated as a result of two world wars, increasing competition in world markets and so on.  In response to the great depression of the 1930s, we also developed a welfare state, so that poorer people in society had a safety net, and could benefit from free health care and education.  So we underwent a relative decline to become just one of the several richer nations.

The structure of the economy evolved from being largely focussed on manufacturing towards a service based economy.  But it hasn’t entirely – motor vehicles, for example, still make up around 11% of British exports (even if most of the car manufacturing companies are now foreign-owned).

Most notably during Lady Thatcher’s time as Prime Minister in the 1980s, government policy was aimed much more at encouraging enterprise and the private sector.  There was a wave of privatisation of state companies, and reduced taxes to encourage private business.

This encouragement of enterprise hasn’t been confined to the Conservative party, which is traditionally more supportive of private business.  It was under a Labour government, and supported by Gordon Brown, that the government developed the idea of Enterprise Week UK.  This was a forerunner of Global Entrepreneurship Week which emerged in 2008 as a result of the combination with Entrepreneurship Week USA.

The renewed interest has even transferred into popular culture.  One of the most successful television programmes in Britain in recent years has been Dragon’s Den – which has completed 11 series.  Entrepreneurs pitch their ideas to a panel of venture capitalists who offer to invest in them – or not.

We need entrepreneurs to develop new, dynamic businesses to compete with the emerging economic powers.  They are also better placed to innovate – to find new ways of making products or providing services.  Our relative economic prosperity relies on keeping ahead of the competition.

Thankfully, we have flourishing clusters that are nourishing lots of new start up companies like the “Silicon Roundabout” or “TechCity” in east of London and the “Cambridge Fen”, which is where many ideas from Cambridge University are being developed.

It’s been enervating talking to visiting entrepreneurs, business angels, and start up specialists this week.  I’m not sure that I speak the same language as they do, but their energy, enthusiasm and creativeness have been inspiring.