Close your eyes and picture a risk. Is the picture in your mind’s eye a danger or an opportunity? Few of us realize that risk is not necessarily something bad, and in fact can lead to something wonderful. Another common misconception about risk is that it is all or nothing. Either you can control all of the outcomes of a decision or you can control none of them.
For budding entrepreneurs or early-stage enterprise leaders, this misconception can be paralyzing. Yet the most effective leaders are those that embrace risk and manage it towards the most positive outcome.
In truth, the knowledge and control you have over the factors included in risk are always on a spectrum. Especially in these times of economic upheaval, the degree to which you can know and control all that is knowable and controllable depends on the tools you have available at the time of decision making. And the knowledge you have will never be complete because no one, you included:
Once you recognize what is controllable and knowable and what is not, the most essential and least asked question is “what is the worst case scenario?” If you can live with your answer, then the risk is a likely path to opportunity.
Each one of us has a different tolerance of the unknown and even the “worst case scenario” varies based on the eye of the beholder. For this reason, truly knowing and understanding your own style and appetite for risk can be one of your most powerful assets. Picture a continuum, if you fall on one end you are a “Risk Worrier™;” on the other end, you would be a “Risk Warrior™.”
Risk Worriers are people whose motto is “better safe than sorry.” These are the leaders who over-rate uncertainties, are pessimistic about outcomes, and prefer security and status quo to reaching for potential opportunities. The term “analysis-paralysis” definitely applies to these risk-avoiding leaders.
Or are you a Risk Warrior? Someone who participates simply for the risks involved and might be seen as over-daring when it comes to risk? This end of the continuum brings a different set of problems that can occur when the risk taken is not well understood and the chances of failure are increased.
Or do you fall somewhere in between? Do you step back and assess the risk and its consequences to determine if the probability of potential success is greater than the probability of potential failure? Ask yourself when you hold yourself back from risk taking and identify the times when you were willing to take risks. Looking for a pattern will help you understand your style and assist you in assessing when to take risks and when to pass because, at base, if the ROI is not greater than the chance of failure, then passing on the risks increases your chances of success next time.