Posted by Dave Lorenzo - Business Coach

Successful people take risks – the possibility of damage, injury, or loss – in order to capitalize on opportunities. Risk-taking is a part of everyday business and everyday life. If you are a strategic thinker (as discussed in Chapter Three), you are already contemplating the potential consequences of every decision and have prepared contingency plans that you can put to work if things don’t go your way.

There are certain types of risks that you can almost never proactively address. These are the risks associated with accidents, natural disasters, or another unexpected calamity. To address these issues, you transfer the risk by purchasing insurance. Super-achievers have emergency plans in place to deal with the aftermaths of these types of situations. They review them on a regular basis and they assess their insurance coverage to make certain that it is up to date and sufficient for their needs.

The type of risk that most people and most businesses face each day is the risk involved in making decisions. This is referred to as speculative risk because the possibility exists that the outcome could be either favorable or unfavorable. The risk taker is speculating on the potential result of the decision. Successful individuals win these situations most of the time; the outcome is favorable more often than not. In order to win they use a four-step process to aggressively evaluate each opportunity.

Assess and eliminate the risk of doing nothing. You may often sit back and wait for others to take the lead in a situation that contains an element of risk. Occasionally, the appropriate decision for a given set of circumstances is to take no action whatsoever. A top achiever is excellent at assessing whether or not action is warranted in a certain situation. She works to immediately quantify a situation and determine if doing nothing is a viable option. If it is not, she rules it out instantly. She does this even if she does not yet know what the appropriate course of action may be. She views the first step in the process of making a risky decision as deciding whether doing nothing could be an option.

List the proactive steps that could positively influence the outcome. For a successful individual, the next step in evaluating risk is to list all of the potential actions that could be taken immediately to reduce the risk of the decision. What information could he gather? How much information would he need? Who are his resources? What can he do right now to get up to speed on the situation? He lists the answers and enlists people to help in gathering the necessary information.

Live the Triple A rule - Always Avoid Assumptions. Assumptions have been the cause of more than one bad decision. A top performer does not take risks unless she has built a fact-based foundation for her decision. This intense individual always avoids assumptions – particularly when dealing with risk.

Play the odds. When making a decision, a successful individual always tries to understand the odds involved in his choice. He looks at the probability of a favorable outcome vs. an unfavorable outcome. Is there anything that can be done to increase the likelihood that the outcome will be favorable? Can he take steps to minimize the chance of unfavorable events? He only takes risks when the odds are in his favor.

Filed under: Personal Strategic Planning
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