If you’ve ever taken a risk evaluation for an investment, you’ll know that along with risk comes great gain. Any investment risk graph will clearly illustrate the up and down-swings that can come as a result. Exposing yourself to the fluctuation in the stock market can make you great windfall profits, but also huge losses.
Having the right backing
Taking significant financial risks realistically requires backing. As Hiscox points out, the biggest risks are often taken in the early years of business. These risks then went on to define that company. For example, Google underwent a significant financial risk when they took on YouTube for $1.65 in 2006. Almost fundamental to this success story was the sheer economic weight of Google’s financial input.
Having the foresight to pair your fiscal backing with insurance also makes your business risk less dicey. Finding a specialized insurer, such as Hiscox for example, puts your venture in much safer hands.
Exposing your business to risk also applies the same potential for gain and huge losses. When there’s so much at stake, is there such a thing as a smart risk? There are a number of ways in which you can take risks successfully. The factors determining a successful risk-taking strategy include:
- Right sizing
- Right timing
- Relying on knowledge and experience
- Maintaining skepticism about predictions and promises.
Despite this advice, the idea of a ‘sensible risk’ almost seems like a contradictory idea. Realistically speaking, what are the main questions to bear in mind?
What can you afford to lose?
Making a business risk shouldn’t be approached like an amateur poker player. Pushing all your chips forward and then losing it all for the sake of an acquisition or reputation is an idea likely to make any CEO wince. In terms of strategy, risk is worth it when it pays off, but if it doesn’t, you need to have a backup option.
Who is best for the job?
If your company is going to carefully take some risks, then you need to decide who is best for managing the project. Will it be the loose cannon who is a bit wild and unpredictable because they seem at home with the idea of risk? Or will it be the level-headed negotiator? Hopefully, you’re inclined for the latter. With great risks come great responsibility, so it’s a good time to decide who can withstand the task. They can pay off, but when approached in the right way.
Be prepared for a potential failure along the way
The conclusion to this is that nothing is certain, but you can mitigate risk. Taking risks is part of business. Therefore, you should realistically expect a few small hiccups in your larger endeavors. Keeping morale boosted and everyone striving to achieve the same aims together will ensure that no one feels like giving up. It should be easy enough to keep everyone on side if they know that you have prepared. Nothing is more reassuring than knowing that if the worst happens, all is not lost.