Analysis Of The Various Angles And Dimensions To The Risk

Typically, high risks are high paying and only people and organizations with huge capacities capable of withstanding the shocks resulting from an eventual failure will readily cash in on the opportunities of high risk ventures without much worries due to their ability to still survive. Even at that, the nature of the risk may cause even a strong capacity holder from taking it if there are moral angles to them. Great people, organizations, dare devils and history makers are the champions of high risks.

Medium risks are in between low risks and high risks and as such on the average side. A medium risk is a “fifty-fifty” situation that gives equal chances for success and failure. Medium risk is still considered high risks especially in unforgiving environments and situations in which mistakes could be irreversible and in which losing any part of something is not considered an option. Medium risks are the second most common in business but most often favored by big businesses. Rarely do small businesses and startups take on fifty-fifty risk. A risk should not threaten the survival of an entire business or individual or organization in just one transaction or attempt. Exceptional people and organizations take “fifty-fifty” risks and graciously pay when they fail. Low risks are the most common kind of risks there is and everyone takes it. While everyone takes low risks, few take medium risks while very few take high risks that is why they standout because the higher the risk, the higher the rewards in most things in life generally. Business and careers are equally determined by risk for their values and rewards. Certain factors determine the financial rewards of business and careers of which risk is number one and the other factors are indirectly tied to risk in some way. Some of these factors include risk, duration of qualification, scarcity of skill set, educational challenge, gender, convenience, location and number of other remote conditions but a critical look at each of them indirectly points them as risks. Schooling for a long time to get qualified is risking one’s days to uncertainties. Practicing a profession not friendly to one’s gender is a risk and increases chances of failure or even death, say a woman serving in the infantry. Her capacity to run and take on physically exhausting situations are limited. The locations one does something or practices his profession increases or decreases his or her risks. For example, an engineer working offshore or in the midst of potentially explosive facilities or a military pilot on mission. Definitely the risks are more in some and less in some while mild in others hence rewards would not be fair to be the same for all. The convenience people enjoy or the inconvenience they suffer determines in a large extent how much they get paid. The challenges of the working conditions are part of the risks suffered.

How does one avoid risks? There are different strategies to avoiding risk based on the idea of choosing the lesser of two evils. Which is lesser? Which is higher? When, where, how, what, which and why? The risk decision is unique for each situation and subject of risk in question.

The strategies to avoiding risks are going to be treated as a risk management approach to things. We discuss them one after the other. While at it, there is an aspect of risk that has to be considered which is Risk Quotience. Risk Quotience is propensity of people to take risk given equal situation. While some are more daring and enterprising, some are more careful and fearful with time, energy and resources. The risk quotience as expected has impact on the life and general success of people. Those who tend to risk more tend to succeed more generally. The analogy of the higher the risk, the higher the reward still applies with individuals. Most self-made men and women tend to be bold, daring, unperturbed by outcry against them and are not scared to take on the conventional or swim against the flow of trends. The risk quotience also tells of how dangerous someone may be living which may or may not be good. We are always exposed to certain levels of risk even if we stay indoors but the fact is that some tend to be more adventurous and insanely daring when it comes to chasing their purpose and pet idea. These are the men that changed the course of the world over the centuries. It is however good to note that not everyone with high risk quotience gets to succeed .risk taking is living in a world of two extremes. The reward if one succeeds is insanely high and the punishment is equally high and sometimes very hard to survive. That is where the issue of risk analysis and risk management takes preeminence in the scheme of things.It is a fact that every great leap forward in human life begins with a stride step of faith into the unknown. Men and women who accomplish wonderful things are invariably men and women of great faith and confidence in themselves, potentials and their abilities. The better you become at analyzing and assessing risk, and then avoiding as much of the risk as possible, the more competent and more capable you will become, and the more successful you will be.

Now let me analyze the types of risks. There are basically five types of risk for you to consider.

Uncertain Based

The first type is the simplest. It is the risk that is not yours to take. It is the decision that you do not have to make or the gamble that you do not have to engage in. Every action has a consequence and often creates the need for further actions, either to follow up on or to remedy what happened. Whenever you can delegate an act entailing uncertainty, you can reduce your risk of losing time and money and can increase your likelihood of long-term success.

Unnecessary Risk

The second type of risk is the risk that is unnecessary. You engage in an unnecessary risk when you act precipitously, without sufficient information or without taking time to think it through carefully in advance. Peter Drucker said, “Action without thinking is the cause of every failure.” Many of the mistakes that you have made have occurred because you acted without thinking that is, you acted without taking the time to minimize the risks involved.

Convenient Risk

The third type of risk is the risk that you can afford to take. Calling on a new prospect, following up on a lead, and exploring a new opportunity all are risks that you can afford to take. In these cases, the cost of failure is very low, while the rewards of success can be very great. Buying an inexpensive product or service, trying a new restaurant, and going out with a new person all are risks entailing uncertainty that you can afford to take because the down side is limited. Perhaps the worst that could happen is that you would experience a little bruise to your ego.

Hazard Based Risk

The fourth type of risk is the risk that you cannot afford to take. The consequences of making a mistake would be too enormous. You cannot afford to bet your whole company or your whole bankroll on a speculation of any kind. You cannot afford to commit all your resources to a single project and have your entire success or failure hinge on the outcome of that project.

Many salespeople make the mistake of working on one very large prospect and gradually curtailing their efforts to develop a series of smaller prospects. From everything that I’ve heard and seen, whenever a salesperson does that, the large prospect always fails to materialize, and the salesperson is left with empty hands and an empty pocketbook. People in the world of investing talk about the importance of spreading one’s risks. You don’t put all your eggs in one basket. No individual and no company should be dependent upon one or two people for their financial well-being. One of the best ways to minimize risks is to develop alternatives to what you are currently doing. The more alternatives you have, the lower your risk, and the higher your likelihood of success.

High Returns Risk

The fifth type of risk is the risk that you can’t afford not to take. The down side may be costly, but the up side is so exciting that it is very much worth taking a chance to go after it. If you are working on a big prospect whose headquarters are a long way from your main office, it’s certainly a risk to travel all the way there and back several times, but it’s a risk that you can’t afford not to take. If the prospect materializes, it can make a major difference to both you and your company. Sometimes you will be given a job opportunity that you can’t afford not to take. Although there is always a potential loss involved, the up side may be tremendous.

In Managing Risk

In managing risk, a basic wisdom is to choose the lesser of the evils with the highest reward. We as humans what as much as possible for as low as possible. Hence the haggling of prices and cost comes in to play between people and between a person and the decision he or she wants to take. Yes which of the evil is the list power by hit? Which of the risk is the best pay? The lesser of two evil is measured by the relative gain per risk between two risks. The lesser the gain over risk the least desirable it becomes. Every situation comes with risks which are to be measured on their merit. You succeed more when you don’t just take risk but calculate the risks. Some risks are very high but very worth taking while some are very low but make little economic sense. Business is based on rationality and logic not emotional considerations. Unfortunately, many do take risk purely on emotional grounds and end up suffering for it. Your emotions should never stand in the way of your dreams by using sentiments to override logic. On the other hand, we run the risk of creating dangerous enemies among fellow humans if we can’t balance logic with reasonable dose of human instinct because certain are true but which are bot logically provable. Choosing the lesser of two evil is wise strategy that enables a person, nation or organization to avoid spreading themselves wide by fighting two enemies while making themselves more competent and advantageous by not only taking on one enemy but taking on the smallest in order to make success more realistic. The concept of risk a very simple but at the same time complex subject that many are sometimes left confused and clueless because they don’t see certain challenges coming that show up much later.

Simulation is one aspect of risk management that people need to master the art of practicing. Like stated earlier, risk is like a human enemy fighting a person hence one needs to respect it. The need to play the devil’s advocate in comparing strategies with respect to varying risk and hazardous situation is very important to the attainment of success in a venture, career or project.

Risk management is a critical thinking measure that serves to help people identify, understand and prepare for all the knowable kind of risk before him or her. Definitely some risk may not be obvious in the outset while some become obvious as things improve or progress but taking them off as they come is a very prudent and energy saving approach. Some risks are better dealt with in the outset, some before execution, some should be avoided while others can be ignored if the measures of avoiding them are more expensive or takes more than the maximum consequence of such risk. We can always make the best of both situation when faced with a double challenge. Why do we have to choose between two evils instead of taking both of them on or avoiding both of them? First, choosing the lesser of two evils come as a fact of necessity which means we find our self in a situation where time and escape from all dangers are not available and must take on one thing as the only way to go. What does one do? Take on the one is relatively better position to overcome. Now let us look at some scenarios of this strategy of risk together. If you are trapped between a lion and the deep blue sea and have just 5 minutes to do something, what do you do as to pick one of the enemies? The answer is not as simple or as direct as it appears. First there has to be a quick risk analysis on both enemies and on oneself. Here is how the risk analysis is to be done and reconsidered all in a minute or less due to the urgency of the situation and an awareness of the possible consequences. On the lion, one needs to answer these questions. Is the lion an adult lion? If yes, is the lion an old lion that may not be very strong enough to withstand a determined human? If yes, then the lion can be chosen to be taken on. On the milder side, if the lion is a baby lion that is not fully developed, then one can take it on as a low risk.

But if the lion is an adult lion that has fully developed claws and confidence like a typically hungry lion, then one may needs to look away from the lion. On the other hand, if one is armed with a knife or sword or spare or some weapon or even stick against an adult lion, he can still consider the lion. On the sea, one needs to look at the sea and decide if the sea has high waves capable of pulling one in finally once one gets in. if yes then one needs to look away from it. But if the sea is calm or dense like the Dead Sea where drowning is not easy in which even a non-swimmer can swim on, then it may be worth looking at. Also if there is a possibility of being rescued before drowning, one can consider the deep blue sea. Also if one has a mini boat to quickly paddle in or has a life jacket to quickly put on and enter the sea, fine. On the other hand, if it is a shark infested sea with sharks seen waiting, one with not only have to look between the lion and the deep blue sea but between the shark as well. On oneself, one will need to do a quick rundown on himself as in strength, weakness, opportunities and threats. If he or she is a great swimmer, may be in the league of Ian Phelps and other Olympic swimmers or some local fisherman with good knowledge of the sea, then he is in good position to consider the sea but if he or she is a bad swimmer, it may be wise to look away from the sea as much as possible on the other hand the man is strong or a bull fighter, he can consider the lion but if he is not an extraordinarily strong man, he had better look away from the lion. This is an analysis of weaknesses and strength. If the man or woman can see some opportunities in being rescued or in buying a little time by scaring the lion a bit by dodging and charging at the big cat before help comes, he or she stands a chance in considering the lion. But if the man or woman, as the case may be sights coast guards or naval officers or fisher men or even pirates or some help coming from the sea, he or she can consider the deep blue sea. On the other hand, if the sea wave or current is very high or very or is very highly infested with deadly sharks which can be seen swimming even close to the shore, then one needs to look away from the deep blue sea. From this, one has carried out an analysis on opportunities and threats.

Note, the above analysis must all be quickly carried out within a minute or less. Not just that, the decision must be carried out long enough before the lion comes. Why? Because while one will have to choose the deep blue sea by going to it by his or her volition, the lion will on its own come for the person naturally because he or she is a potential prey. The above analysis have helped in understanding the various angles and dimensions to the risk and makes one more informed on his or her decision even if it ends up failing because a chance must be taken and something must be done. But the analysis helps to filter out the various options of opportunities that come with our strength or outside help as well as weighing the mildness or harshness of the consequences.