Risk is not something to be feared by leaders, it’s something to be managed.
At first, the idea of taking a risk may seem unpleasant, even dangerous. But when risks are analyzed objectively and assessed realistically, fears related to risk can be managed more easily—and individuals who are willing to take the plunge can reap some serious benefits.
Learning how to effectively manage risk gives leaders the ability to be more proactive in making smart, strategic decisions at work. It also helps to create a culture that is more tolerant of intelligent risk taking when making decisions. This gives all members of the organization ample opportunities to contribute to the growth of the business in new and exciting ways.
The most successful businesses realize that intelligent risk taking should be encouraged. When people make smart (but potentially risky) decisions that align with the business’ strategy—without fear of retribution or blame—they are freed up to devise creative solutions to business problems, and the whole organization benefits.
This does not mean that people are allowed to run wild or operate wholly unsupervised. A leader is responsible for setting expectations for others. He or she must also effectively and clearly communicate the organization’s appetite for intelligent risk, the decision-making tools that are available, and the control procedures that are in place.
By gathering information, asking targeted questions, creating solid plans, and learning from the experience (regardless of the outcome), the uncertainties in risks can be more easily controlled.
Some people are natural risk-seekers. These individuals are usually quite innovative and enjoy challenging the status quo. They are comfortable with making fundamental changes in the way things are done and are willing to take great leaps of faith, especially if the risk could pay off in a big way.
Strategic Risk Taking
There are some strategies that will assist you in making intelligent choices as they relate to risk and help you decide whether the risk under consideration is worthwhile:
- First, you must be able to really see the risk. This means observing your surroundings and using your instincts, experience, and best judgment to anticipate the dangers and opportunities that your business may face.
- When you encounter a potential risk, step back, slow down, and look at it objectively. Take some time to think through the risk carefully and logically before rushing to judgement. Clarify your intentions by clearly defining what you hope to accomplish by taking the risk. Know how it will help you achieve your business strategy.
- Then, gather intelligence. To decide whether to take a risk, you must first evaluate the information that you already have, determine what information you still need, and then seek out that information so you thoroughly understand the risk.
- Assess the risk, ask yourself how big its impact might be, how likely it is that taking the risk will result in a positive or negative outcome, where the risk comes from, and what value the risk could potentially create for you and/or your stakeholders.
Once you know the pros and cons, you can evaluate your options and formulate a plan. You must have the courage to trust your judgment, your experience, and the information you gathered—and then move forward. When the process is complete, review what you learned from the experience.
Contact CMOE to start improving your leadership and management today.