What does it mean when we talk about business risk management? Easily said, anything you do in life carries a certain risk, the secret is to calculate the risk in a way that it does not hinder us to move forward and at the same time minimizes possible failure.
If you decide to jump out of the plane without a parachute, possibilities are high that you have taken a risk you won’t survive, unless you truly believe in miracles or are Rambo. However while you are still taking a risk while jumping with a parachute, it is a calculated risk which many are willing to take for having the experience of the thrill or the fun they are experiencing while doing it.
The same applies when it comes to taking risk in business; calculate it, than make a decision.
We all know the expressions “the bigger the risk the higher the reward” or “where there is no risk there is no reward”. While I am tempted to agree, I am also sure that it may lead you to failure or loss of your business if you do not manage risk properly.
When you deal with potential risk, keep in mind that risk is just a perception and what seems risky for one does not for the other. It all comes down to the meaning you give to the situation and your ability to make a decision, that we call business risk management.
Face the potential risk. Sometimes we try to avoid making decisions which seem too risky for us, just to find out later that we have to take them regardless.
We make decision and act on them for two reasons, either because we are inspired or we are desperate. Now inspirational decisions and risk are much easier to handle, because you likely have time, can think creatively and then make a decision how to execute. When you are desperate you don’t have the luxury of time, are most likely under high pressure, can’t think straight and must make a decision regardless. The earlier you face a potential risk, the better the outcome will be.
Make a decision and stick to it
Evaluate the situation, look at the pros and contras and then make a decision. Most very successful people make decisions quickly and stick to them; this will likely warrant success or at least will avoid total disaster. Even though you might realize later that another route would have been better, a bad decision is better than no decision at all. Make the best decision you can make under the circumstances, go with what is right at this given moment. Keep in mind that situations are changing and slight adjustments can be made without changing the whole idea.
Be in a strong state
Without having to be reckless, much depends on your state of mind when you make a decision to take a risk. One of the keys to successful business risk management is the ability of the person who takes the decision on a certain risk to believe strongly in a positive outcome. It becomes harder if you have to report to a board or a handful of partners, which as mentioned before might have a completely different perception of the situation. While it is not bad to listen to different advice, at the end of the day, you are the one who has to develop the skill to recognize potential risk and make a decision to the benefit of your company to take it.
Sometimes you will be forced by situations you cannot influence to take risk you would otherwise not have to take. On the other hand you be trained to make the right decisions and even though we all want to avoid unpleasant situations and surprises, business risk management is a very important part of being an entrepreneur. Some of the greatest successes came from the point of having nothing to lose and having to push forward no matter what. The other choice would be to give up, however in my mind failure is not on option, you decide for yourself!
Category: Management related