How To Deal With Risk
People often do not properly assess the potential rewards for taking a risk. Nor do they focus on how well the risks and rewards match.
Your company faced a potential growth initiative that offers both high risk and high reward.
Ask yourself:
1. If you take this high risk and fail, will you lose the ranch?
If yes, you may not want to go ahead. If the risk is not of the bet-the-company type, then ask,
2. If you fail, will it put your company at a severe disadvantage?
Sometimes it is worth betting on a new initiative or idea, but you always want to have a handle on what you are up against. You also want to know how to reduce risk, shape it and manage it.
Convinced the risk is worth taking, you then drill down farther and decide whether the project is too risky, given the other risks in your company's investment portfolio.
Ask again and decide:
3. Would the inclusion of this project push the company over the edge?
If yes, and should you still decide to take the risk ahead, ask,
4. Would sharing the risk by an alliance be an acceptable option?
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