Understanding the Opportunity Side of Risk

Personal development pioneer Earl Nightingale once said, “You can measure opportunity with the same yardstick that measures the risk involved. They go together.” In other words, risk and opportunity are deeply interrelated, and learning to balance the two is essential to the growth and development of just about any business.


Types of Risk:


Both risk and opportunity can be divided into categories:


Strategic risk is devoted to identifying and evaluating new services, products or other opportunities and deciding which ones pose the most potential advantage with the least risk. In most cases, the most novel opportunities are associated with the least-known and least-understood risks, so the potential for loss tends to be greater.


Operational risk looks at the processes currently in place and decides how to maximize opportunities by identifying and implementing the best practices, best employees and other best-of-breed business elements through a fine-tuned policy of regulations and rules.


Growth risk involves managing the scale of your business with your company's ability to meet expanded goals; many new businesses fall prey to the temptation to expand too rapidly, finding out too late they're unable to meet greater demand or meet the costs associated with an ill-timed expansion. On the other hand, growing too slowly – being too afraid of risk – can result in the competition winning over your market.


Financial risk is closely intertwined with the other three types of risk and can include investor risk, the cost of debt, revenue potential vs. expenses, and investments in employees and promotion.


Overcoming the Fear of Failure


Learning to embrace risk usually isn't an easy task, even for seasoned business executives, but it's essential for competitive growth and continued relevance within your market. The key is to look at “failure” as an opportunity for learning and for identifying the changes that need to be made in one or more areas of your risk-opportunity balance.


One of the best ways of learning how to manage strategic risk is to become one of your customers; devote yourself to understanding the customer experience firsthand so you can identify ways you can improve your product or service and the way it's delivered. It's also a good way to identify potential areas for growth and development of new products or services.


Accurately balancing risk and opportunity is the key to success for businesses of all sizes. Instead of running from risk, learn to understand its value so you don't wind up leaving potentially lucrative opportunities behind.

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