Top 3 Things to Consider Before Taking a Business Risk
The mantra “no reward without risk” holds true, especially for executive leaders. The challenge with risk is to know when to take it and at what cost. As the CEO of your organization, your team members, employees, and other key stakeholders are reliant on you for your leadership. Take the right calculated risk and it could pay off big for your organization’s growth. But, take the wrong risk and your company could be left reeling trying to recoup significant losses. The CEO group consultants at The Brain Trust recommend considering these three risk factors before making the plunge.
1. Is the risk aligned with your company’s mission?
Risk-taking should always be strategic, never reckless. Think about your company’s long-term and short-term goals. Is the risk you’re considering in line with what your company needs to accomplish to stay competitive, expand, or to fulfill its mission? If the answer is “no” then it is a risk that is likely not worth taking. Whether it is investing in a new product or adding another location CEO coaching experts strongly advise researching all potential outcomes of your decision. Thinking through the risk in its entirety is an excellent exercise to ensure that all angles of your decision have been analyzed and all aspects of the risk are strategically positioned to provide a direct benefit to your organization.
2. If this fails, will the company recover?
Part of being an effective leader is to be realistic in how you manage, lead, and make decisions. Evaluating both the potential success and the potential failures of any risk is very important in determining if it is worth moving forward with. In some cases, the “go big or go home” principle may apply and you may need to take a large risk to propel your company to the next level. However, CEO advisory groups often caution on doing this, and, instead, suggest breaking a large risk down into small and sequential testable risks. This way you are able to test the waters and give your business time to respond before proceeding with the next, larger risk. Though this process may prolong the “stress test” on your business, it better enables you to control just how much risk you take on and gives you invaluable insight into how certain risks affect certain aspects of your business.
3. What am I willing to lose?
As the CEO, the brunt of the responsibility and organizational leadership falls on your shoulders. Taking a risk does not always break down into monetary losses and gains. Intangible aspects such as work-life balance, reputation, self-esteem, and even future career opportunities have to be considered. For example, if you decide to launch a new product or service, this may mean longer hours spent in the office or more time spent away from your family on business trips. It is these non-monetary consequences that are equally as important to consider because they will influence how successful your outcome can be. You may reflect on what you are willing to lose, should the risk not pay off, and decide that the loss is too great. Either way, it is an essential exercise to consider what your risk threshold is before you take the risk.
Are you contemplating taking a leap with your business, but not sure where to start, or if you should do it? We invite you to consider joining our CEO peer group and network with other successful CEOs to learn what they did to propel their companies to the next level and how they manage risks within their own organizations. For more information about our CEO advisory group, click here.
