Spooked by Risk?

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Spooked by Risk?

By Anna MaskerIn standard24th October, 2016


There was once a time that my kids hated the scary characters roaming the street on Halloween.  They would give every ghoul or goblin a full 6 feet of clearance as we passed, and would cling to my hand a little tighter. 


I miss those days.


Now my kids are all over Halloween, taking weeks to plan their trick-or-treating routes and lining up buddies to walk the neighborhood with us.  And their costumes???  The scarier the better. 


I love their enthusiasm for the holiday, but remember how scared they were not too long ago. 


Similarly, we have the same issue when it comes to doing scary things in business…


We get spooked by risk.


In more technical terms, it’s called risk aversion.  As defined,  it is the behavior of humans (especially consumers and investors), when exposed to uncertainty, to attempt to reduce that uncertainty. It’s when you choose to put your money in a bank account because it’s less risky than putting it in the stock market. 


However, many business decisions require taking risks that don’t have as much information around them as the stock market does.  How do you understand the risk in your decisions?


Pull back the mask.  Risk is like the scary version of a Halloween costume.  Sometimes what looks like a big risk may not be if you look beyond your initial impressions and see the longer term impacts (both good and bad.)


Shine a light on it.  Understanding a risk requires framing the problem or question properly.  Often times, we have biases and take a narrow view of the problem.  Just as you would sweep a flashlight back and forth down a dark street, you want to make sure you are able to take a larger view of the situation to assess the whole landscape.  Once you spend time understanding the whole landscape, you can make better decisions. 


When needed, give wide berth.  Not all risk is good, and there are times when you’ll assess a situation and feel that it’s just not the right opportunity.  Just like the ghouls and goblins on the street, it’s not a bad idea to avoid certain risks. 


So if you find yourself consistently avoiding risk, you may also be avoiding the reward.  The key is to spend time on really understanding the opportunities and risks associated with a decision.  You might be surprised to find that something you thought would be very scary actually turns out to be not too bad. 


Or, as my kids would say now:  Don’t avoid the scary houses – they always have the best candy.

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