Risky Business

July 10, 2009Sparxoo

risk is required in effective business strategies

By David Capece, Managing Partner

In today’s recession it seems that the saying “nothing ventured, nothing gained” could be re-written as “nothing ventured, nothing lost.”  But is that really true?  In the long-run, is there a safe path to success? With a tough economy, risk-taking might seem even scarier than normal. But the truth is that there are also downsides of playing it safe.  Our entrepreneurial spirit pushes us to explore risk, and seek out smart risk.

Before taking any risks, the first step is to be introspective and consider your situation, your goals, where you’re heading.  These days there are more opportunities than there is money to fund them.  Set your priorities and gain as much insight as possible, to make informed decisions. Look at risk-taking as an exploration.   Risks are necessary to make change happen.  Look for ways to de-risk the opportunity. Your instincts are great, but why not get some information to provide you with perspective.  Give serious thought to the opportunity in advance, including developing your hypothesis of what the outcomes will be and doing an experiment for validation.

The same principles of risk-taking in the business world apply to personal decisions.  For example, a former colleague recently asked at what point should you leave the corporate world and enter the entrepreneurial world?  If your firm is laying people off, start pursuing an entrepreneurial opportunity at night and on the weekends to learn more about the viability of such a path.  Talk to experts and mentors to get their advice.  Be more prepared in the event that you do get laid off, or better yet, leave your job with confidence because you did your homework.

Along the way, you will have doubters.  Don’t let one person discourage you, but use the feedback to modify and refine your plans.  When others raise challenges, this can push you to sharpen your pencil and take a fresh approach.  Initiatives that seem risky from the outside may prove successful because the risk-taker could see things that others couldn’t.  It’s important to remember that the other side of risk is opportunity.  As you consider the pros and cons of pursuing ventures, here are some questions to help clarify your thinking:

  • What are the goals over the next 6 months, 2 years, and 5 years?
  • What are the different opportunities to achieve those goals (there is usually more than one path to a destination)?
  • Of those paths, what are the unique opportunities and risks that will be encountered?
  • What could go wrong on each of those paths, and what can I do to further investigate those challenges ahead of time to understand how real the potential issues are ahead of time?
  • Which path leverages existing skills?  Which path can open up entirely new doors?
  • Upon full investigation, weigh the risks and rewards, the pros and cons.
  • Do I have the funding / financial situation to support the preferred initiatives?
  • Be sure to consider “doing nothing” as an option and make sure that the path you select is better than doing nothing…because other opportunities will likely present themselves in the future.

During the current economic downturn, the velocity of money has slowed, meaning that money is not moving through the system as quickly as it did at the housing ATM peak.  Likewise, the velocity of risk-taking is slowing as well.  With the slower game, it’s not necessary to take every risk, it’s necessary to take the right risks.  Have a clear vision of what you are trying to accomplish, investigate, and move forward with confidence.

Photo by B Cleary from Stock.Xchng