Risk; What a Great Word

Risk is a four-letter word that deserves your attention and the sooner you pay attention to it, the better-off you’ll be.

Risk is a scary word to most people, especially as the world economies continue to slow and in some cases crumble. Risk is played by the media to grab your attention and it’s given a spin by investment firms and banks, by offering products and services which are low-risk, limited-risk, or no-risk.

You have to address risk with respect, because you would be foolish not to.

There’s a good side to risk and here are some of the factors that make it a great word;

• The mention of risk takes many of the weaker players out of the game. These players are so afraid of a possible loss that they’ll run and hide as soon as the risk factor is brought up. Little do they know that all investment and business situations contain risk.

• It’s important that you know that all risk is not created equally. There’s the risk of losing everything and there’s risk that is little more than stubbing your toe.

• Risk can be molded to fit your constitution.

• Risk attracts smart capital.

• Risk and gain are kissin’ cousins.

• If it weren’t for risk, the world would be a crazy place and the business world would be doomed.

Let’s put the risk picture together and you’ll see the benefits.

As I mentioned, just hearing the word risk or having risk associated with something, chases the weak-minded away, which gives you fewer competitors and an edge.

Now that you’ve limited the field of competitors, you have to be smart enough to know that risk is part of our daily lives and is contained in everything. Getting up in the morning, you run the risk of getting struck down by a passing car. The reality of this example is that the likelihood of such an event happening is remote.

To be more specific, if risk was such a bad thing, why would anyone ever form an insurance company? Some of the reasons are; there’s money to be made with risk, not all risks are equal, and you can limit your exposure to risk.

In other words, you can mold your risk tolerance. Using insurance companies as an example; there are some drivers, smokers, specific types of workers that many insurance companies will not insure, because even for them the risk is too great. That’s not to say there is no insurance available, but with higher risk comes higher insurance premiums.

To speak more generally; a risk perhaps is worth taking if the rewards from taking such a risk pay off in a big way. You don’t have to be stupid about risk or practice total risk aversion, but make sure there is compensation from taking a risk. 

Insurance companies make money, because they carefully weigh the risks of their policies and when the risk is too high they generally go one of two ways; they refuse the applicant or bring in a partner or two to help reduce their exposure. You have to do the same. If a business venture seems too risky, but it offers great rewards if you can pull it off, you might be wise to take on a partner, investor, or decide to walk away if you can’t find a suitable partner.

It’s true that risk and gain are kissin’ cousins; the bigger the risk, the bigger the gain in business. It’s managing the risk that makes the difference.

All of this leads us to how you should deal with risk.

1)      Don’t be afraid of risk.

2)      Shy away from people who are risk averse.

3)      If you risk life and limb, don’t’ go near it.

4)      If the risk involves money, don’t be afraid of it, because you can make more money.

5)      When a risk seems too large to take on by yourself, seek partners.

6)      Before entering a risky situation, know clearly what the rewards will be if you are successful.

7)      If you can clearly define the risks of a situation in relationship to the rewards and they make sense, it will be easier to attract a partner to enter a venture with you.

8)      Anticipate loss, in other words, play devil’s advocate and imagine the worst-case scenario and think about what you would do if the worst did come to pass.

If you make a blanket statement that you don’t like any type of risk, you’re being foolish. Risk is everywhere and you have to build your tolerance, understanding, and knowledge of potential benefits to risk

One of the reasons that many businesses fail is that they do not fully weigh the risks.

Before going into a business, the creator of the business has to run the possible outcomes of making the venture happen. If it doesn’t work on paper first, chances are great that it won’t work with a bricks and mortar or a cyberspace location.

Accept risk as part of any business venture, but with some light research, possible partnering, and a clear vision of what it is you want to accomplish, you’ll have the upper hand on risk. Embrace risk, but remain in control of your senses.

The risk factor is only dangerous if you ignore the fact that it exists.