Risk, Rocks and Reality

Many hours spent watching the World Cup soccer matches these past few weeks got me thinking a lot about risk. I paid close attention to the instances where the players took a chance, and instances where they could have, but chose not to.

I thought about how those instances affected the outcome of the game. Some risks panned out. Some did not. Some risks determined the winner of the game.

Off the field, risk plays a role in many areas. Insurance experts attempt to mitigate risk in order to ensure they are not paying out more than they are collecting.

Financial investors seeking a higher return will encourage risk. In the business sense, risk is the investment of money or resources into something that is designed to deliver improvement, without knowing all of the variables or the actual outcome.

But, outside of the financial world, risk is defined as the willingness to try something you haven’t tried before, when the stakes are high and the outcome is uncertain. The gist of it implies some danger or loss. Risk often invokes fear. Thus, mediocrity, sticking to the status quo and stagnation can be quite common.

It’s sort of like a 0-0 soccer match, where everyone plays conservatively, and nobody is willing to put it all on the line in order to score that winning point.

Some people simply cannot stomach the potential for loss and won’t take risks. On the other hand, others crave the excitement and will take chance after chance.

Most people, however, fall somewhere in between. They will do some analysis of the situation and the contingencies, leading to a willingness to take calculated risk, and the more analytical people will run the numbers on at least five different scenarios before making a plan.

Careful analysis and planning can relieve the qualms of risk-taking naysayers. They will have a good handle on identifying the worst-case scenario and be able to determine how they would deal with it, making them more willing to give the situation a try.

New things cannot come to be without some threat of failure and loss at the beginning. Every new product, every new idea, every new company is forged by some willingness to sink a lot of time, money and resources into an idea someone thinks will work.

But, there’s usually going to be some rocks to climb. So, how can you see the big rocks coming and realistically look at the implications of a risk? Here are some things to think about. 

Define success. What are the successes you hope to achieve by taking the risk? What is the big win?

You should know what you are going after and what you hope to gain. Is the risk worth the reward?

Also, what are the consequences of not achieving success? What is the downside if you do nothing? What is the upside if you are wildly successful?

Predict results. You will want to analyze what you think the outcomes could be. This further defines the upside of success.

What are the best-case scenario results? What will this mean for you? What are the worst-case scenario results? How would you deal with them?

What factors can you measure to gauge whether the idea is working?

Make a plan. You should have a clearly defined plan on what steps need to be completed in order to achieve the desired results.

How will you meet your goals? What team members will play a role in helping meet the goal? And which assignments will each team member be responsible for in order to keep the team moving toward the goal?

Finally, it’s important to remember that your ongoing measurements might and should prompt tweaking in the plan on a regular basis as you go along.

Many entrepreneurs take big risks, and 90 percent of them fail to meet their own expectations because they have not planned how to monitor and manage the potential downfalls associated with their decisions.

The more successful entrepreneur exercises discipline when determining what risks to take, devises a plan to minimize potential downfalls, and assesses each decision along the way within the parameters of the end goal.

So, increase your odds with analysis and planning, but don’t let that discipline keep you from trying anything at all. 

Patti Leith is a managing partner of EDGES, Inc., a strategic planning and process efficiency firm based in Bentonville. She also co-owns and operate e-Gauge Inc., a software services company specializing in talent management and strategic plan execution. You can contact EDGES at 479-203-7198 or www.getedges.com.