Risk Management and Effective Risk taking
This blog will explain to you the most effective way of Risk Management. How the best managers in the world take risks and the principles they use to overcome the challenges of their decisions.
The biggest risk is not taking any risk… In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risks.
Are you left or Right brain oriented ? Are you mostly driven by passion and emotions or driven by your logical sense? Do you carry out a proper Risk management before you jump in?
Some of us have found our peace concentrating on doing exactly what is told to us. Life is free of surprises, but is simple and cosy.
Some of us like taking Risks.
Do you? Have you been always crazy enough to take big decisions which seemed stupid to others?
Well, what others think of you will pass away.
They probably are more busy thinking of themselves. So don’t worry about it.
What matters is what you think about yourself.
You may be a Conformist or a Divergent, but one thing is for certain.
Whether you are looking for success in a small business or trying to grab that promotion in record time, you will do well if you find a healthy balance of your emotions and logic. That passion you have inside must be supplemented with logic and common sense. That will help you sky-rocket while others watch you pass.
If you want to Climb the backyard hill, just gather all the adrenaline you have and show up one day. It will probably work.
If you want to climb the mount Everest however, its quite a different approach. You will need a lot more than Adrenaline!!
Risk assessment and Risk Management:
In medium and big businesses, this is one term which is trending nowadays.
So what is Risk Management?
In a world of growing businesses competition has become tougher than ever before!! Everyone with a self hosted website is a businessman. The internet tells you exactly what to expect, exactly which challenges you will face and exactly how to overcome them. No one is lagging behind.
In an office, big or small – everyone is fighting against each other to rise to the top!!!
When we were kids we were told that we needed Skill and expertise to succeed in life. Well, not so any more!!!
You can sit at home, be perfectly content in your dead end job. There is no risk in it. Or you can take the alternate route and try to soar like the eagle!!
If you want to succeed, you need to have that edge over others, and constantly think – what do you have which others don’t?
You need to take risks, you need to be passionate enough, bold enough to venture into places which no one else has dared to venture into, and you cannot be dumb enough to return empty handed.
Enter – Risk Management!!
How to balance your Emotional self and your Logical sense to get the best out of your potential
When Your emotional self tells you to get passionate you shoot off with your new idea! But in professional life taking that risk is not about proving how much adrenaline you have inside, it’s not like jumping off a cliff hoping your parachute will save you.
Its about whether that risk will bring you professional success or not.
That’s where your logical self comes in.
That is where proper Risk management can save you from a lot of hassles.
Risk management is a way to effectively calculate your risks using firm evidences and examples. This is extremely important.
For example if you are in the food industry, launching of that new brand of Muesli with that bright Pink logo may bring you a huge success and turn all eyes towards you. At the same time that same idea may backfire. The same logo maybe unpopular and cause the downfall of your business.
You want to open an Art gallery. You have always been passionate about it. Now you have the means and an unfathomable drive for it.
Do you realise that no matter how much talent you have for the job, a simple decision like location can ruin your aspirations?
You would feel you deserved it, but in the end success and failure does not always reach those who deserve them.
Passion and dreams are our most valuable assets. They lead to our success. At the same time they are delicate, and must be protected by the thick shell of logic around them.
Market leaders like Apple and Microsoft may have revolutionary inventions but they spend millions of dollars on research to determine whether their products will click or not before launching them.
Apparently Apple CEO once said they do not, but trust me, they do.
When ever you are about to start something to propel you forward, follow these basic rules.
Ways to carry out Risk Management
You want to invest your savings in Real Estate? Find out how the market is doing. Find out whether the government has laid any policies down which will make land acquisition difficult or easier in the future. Find out the trend of rise of property prices and whether you should wait before you buy. Find out What can go wrong?
You want to Start your own restaurant? Go ahead, talk to a few places, find out how they are doing.
Walk in to a really great restaurant, talk to the manager, get an idea. He may not be cooperative but you can get a sense of what they are doing right even by simply visiting the place. Look at what appeals to you – Is it the food? Is it the music? Is it how lovely the place looks with its pink and soft cream décor with a relief to the eye? Is it simply the fact that it’s conveniently located in that part of town where you would go casual stroll and then feel hungry. What did not appeal to you? What would have turned this great place into a dark world? What really can go wrong?
Want to walk into your Boss’s office and ask him for a promotion? Again, where is the challenge? Find out what extra is needed from you. Talk to a few people who can guide you. Spend some time being more productive in your work and learning the responsibilities of the next rank. Its easy to get the seat , tough to keep it. What can land you in trouble?
Assess the risks involved.
This is where you pick up your pen and paper.
Have you thought about the risks? OK, we are getting started!
Write them down in a piece of paper and grade them from being
Too Risky (Grade 5) to Hardly risky (Grade 1).
For example if you have a restaurant, the food being contaminated will be of highest risk. While, once you have a customer base, someone writing a negative comment about your restaurant on Facebook which may cost you a few clients, will be hardly risky.
Also, assess the likelihood of each risk from
most likely (Grade 5) to Least likely (Grade 1).
In the same example above, it is perhaps far more likely to have a negative comment (among the stream of good comments) than to have your food contaminated.
Risk management is to understand clearly what to expect and where you can go wrong in the attempt. Its like diagnosing the disease before it happens and pre-emptively vaccinating yourself to prevent it.
The product of the Likelihood and Severity of a risk gives you the Risk potential.
RISK FACTOR = SEVERITY X LIKELIHOOD
Risks cannot be mitigated completely. You can try to find every possible solution to every probable problem there can be in your venture, but you cannot say for sure you have eliminated them and they will never ever trouble you. That’s too idealistic. In spite of your efforts, your ideas may still tank.
But what we can do now – increase our chances of success by reducing the likelihood of a risk.
Start from the greatest risk going down to the lowest risk which you have listed. Think about each – one at a time. If it goes wrong, you cannot escape the disaster. But by putting control measures you can reduce the severity of the impact and also the likelihood of it happening.
Trying to start a successful blog:
Risk – No readers!!
Likelihood = 4 (highly likely) ; Severity = 4 (Really bad), Risk Factor = 16 !!!
High risk !!!
Do your market research to choose a niche narrow topic which has a demand, but does not have adequate supply of solutions on the web. Also implement measures to ensure your blog is read using various techniques.
Risk likelihood reduced to = 1(Now much less likely); Severity = 4 (Not having readers for your blog is still equally risky),
Risk Factor reduced to = 4.
Now you can go ahead.
Big companies around the globe assess and mitigate their risks on a daily basis before venturing into something new. That’s what they call ‘ market research’.
That’s precisely how it is done.
Try implementing it in your daily life too and do it using that old-fashioned pen and paper, or if you so like – the Yellow Pad!!!
Assess – Categorize – Mitigate
your risks and you stand a much better chance of winning this challenge of life.
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