A Simple Strategy for Deciding Which Risks to Take

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Human beings are naturally risk-averse, meaning they like to control the amount of risks they take and avoid them if at all possible. It’s what helped our ancestors survive.

But in the business world, risk aversion is a dangerous thing. You don’t succeed without taking risks. The world’s most successful companies were all built on risk. And the most successful leaders are those that know which risks are worth taking, and when.

So if you are someone that is not comfortable with risk, does that mean that all hope is lost? Should you pack up your desk and find a new job, one that does not force you to take any risks (like that exists)?

Obviously, the answer is no. There are ways that you can train yourself to see risk differently. You can become more comfortable evaluating, and taking, risks in your company.

Here is a simple strategy for helping you decide which risks to take:

1. Write it down.

The best way to start to evaluate risk is to clearly define it. This is helpful for you, and for anyone else you are working with. By clearly defining the decision that you have to make and what the risks associated with it are, you set the stage for clear thinking. Without this step, you might approach the problem more vaguely and end up scaring yourself out of making a decision.

2. Describe success.

Next, you’ll want to clearly describe for yourself what success would look like. Approach this as if you have already decided to move forward and the project succeeded. This helps you understand what a positive outcome will look like. Too often when we are risk-averse, we spend all of our time thinking about the potential failure and do not focus nearly enough energy planning for success.

3. Describe failure.

Now, only after you have defined what success will look like, will you turn to the opposite track. Write down in detail what failure will look like. The advantage of doing it this way is that you can create a more realistic version of failure. Often, we approach risk by immediately going to the worst-case scenario. But the truth is, more often than not the worst-case scenario is one that is unlikely to happen.

4. What are the odds?

Next comes the most difficult part – the part that trips up a lot of people. But it doesn’t have to trip you up.

You want to try to estimate the odds of success (the version you defined in step 2) and the odds of failure (the version you defined in step 3). The temptation is to say the odds are 50/50. But most decisions, if we are being honest with ourselves, don’t have 50/50 odds. Sometimes a risk is more likely to pay off, sometimes not. And sometimes there is an in-between outcome, somewhere in the middle of the success and failure you’ve described.

The closer you can come to the odds of each version coming true, the more comfortable you will be with the final decision.

5. What are the alternatives?

Lastly, there is a step too many of us leave out entirely. In most decision-making scenarios where we are weighing the risk of moving forward, we ignore the alternatives.

Usually, if you decide to move forward and take the risk, you are giving something else up. There is only so much time in the day, only so much money in the budget, and only so many priorities we can work on at any given time.

Additionally, if you decide not to move forward because there is too much risk identified, you may end up asking yourself what to do next. Identifying the alternatives to this risky endeavor may make it easier to say yes or no.

6. Make a decision.

When you are all done defining the risk, describing what success and failure look like, calculating the odds and identifying the alternatives, it’s time to make a decision.

Don’t let perfect be the enemy of the good. If you have a tendency to stagnate, to get paralyzed by the decisions before you, commit yourself to a deadline. Don’t let yourself ruminate. If you need to, bring in one or more trusted stakeholders to help you forward. Because the truth is, any decision is better than no decision at all.