Deciding whether to take a business risk is a critical yet often daunting task for leaders of organizations aiming to achieve growth and innovation. In such moments of uncertainty, a structured approach for evaluating risks can make all the difference.
Here, 13 Forbes Coaches Council members provide valuable insights into how they assist clients in making informed decisions about potential business risks. Read on to learn how to decide if taking a gamble in the business world is going to be worth it in the long run.
1. Take A Data-Driven Analytical Approach
I would suggest assessing data to quantify the risk and benefits of the decision. Identify the potential risks and have clear mitigation strategies to minimize the impact of any risks. Use analytical data to minimize biases and the impact of emotions on the decision-making process. Finally, consult external experts to test the assumptions surrounding the decision. – Charles Dormer, APEX STP, LLC
2. Leverage Rationality, Psychology And Intuition
With respect to rationality, I would encourage them to do their due diligence via risk analysis and data-driven insights. Psychologically, I would evaluate their risk tolerance, hopes and fears about the decision. Finally, I would ask them how they felt in their gut—what is their intuition telling them? – Anna Yusim, MD, Yusim Executive Coaching
3. Do Your Due Diligence
Many people are unaware of what goes into a due diligence effort. They should do things such as review and audit financial records, scrutinize future projections, assess the market, uncover process and operating redundancies, review potential or ongoing litigation, review ownership concerns and look at potential risks. – John Knotts, Crosscutter Enterprises
4. Find Balance By Weighing The Pros And Cons
Risk comes with reward. The most important thing is to take a calculated risk. Taking a risk means accepting failure and success. Either way is a lesson learned. That’s what we call progress, and that is what is needed to grow. Make that the ultimate goal of your business. – Alex Jones, National Leadership Association
Forbes Coaches Council is an invitation-only community for leading business and career coaches. Do I qualify?
5. Assign The Physical Cost
There are always two costs involved: the cost of action and the cost of inaction. The best way to determine whether or not to take a business risk is to assign the physical cost to it. How much are you ready to lose if you decide not to act and somebody else uses this opportunity? How much are you ready to lose if you do decide to act but end up with a low return? – Alla Adam, Alla Adam Coaching
6. Evaluate Your Tolerance
Everyone has a different tolerance for business risk, as well as personal and professional factors involved in understanding how much of a risk an opportunity actually holds. Step one has to be an honest evaluation of that tolerance and those factors. If things are still looking positive, then a deeper dive needs to be taken into what’s needed to be successful. Every opportunity has a cost and a reward. – Brenda Niemeyer, WayPoint Coaching Inc.
7. Implement A Pilot Project
Consider implementing a pilot project or a small-scale test to gather real-world data and insights. This approach allows for an assessment of the risk’s feasibility, the market response and potential challenges before making a full commitment. Piloting provides an opportunity to validate assumptions, iterate strategies and make informed decisions based on empirical evidence. – Anna Barnhill, Barnhill Group Consulting, Inc
8. Ask Yourself If You Are Okay With Failure
For me, risk yields reward when you can own all sides of the situation and still take the risk anyway. I would ask my client if they would still be able to trust themselves and move forward with confidence even if the venture were to fail. If their answer is “yes,” then it’s no longer a risk. – Sonika Asif, Lush Empires
9. Answer These Two Guiding Questions
Business is a function of managing, not avoiding risk. The two guiding questions are, “Should we do this?” (Does this add to our enterprise value and competitive advantage?), and, “Can we do this?” (Do we have the resources and means to accomplish what we are aiming for?) It is critical to address these questions in this order. Doing something simply because you can is often a recipe for failure. – Philip Liebman, ALPS Leadership
10. Assess Your Mindset And Risk Appetite
Guiding this decision involves grasping the client’s mindset and risk appetite. The process includes defining and evaluating the risk, scrutinizing potential outcomes, aligning them with the client’s capabilities, creating risk reduction plans and preparing for worst-case scenarios. The aim is an informed decision that harmonizes the client’s goals and resources with the risk’s potential pros and cons. – Lara Augusta, Embracing Potentiality
11. Gain Clarity; Own Your Choice
Determining the ROI of any decision requires understanding what’s at stake and how badly you want something. I often see people going to specific people who will either enable their confusion or prompt them to take action. In the end, what’s needed is clarity, not community thinking. Do the work, get clear and own your choice. – Joshua Miller, Joshua Miller Executive Coaching
12. Accurately Assess ‘Calculated Risk’
Risk is inherent in any business decision; however, I would lead my client through a process of accurately assessing “calculated risk.” We would identify each of the main data points, gather as much data or insights as we can, give a grade of critical importance to each point and then make a “go” or “no-go” decision based on a thorough evaluation of the full assessment process. – Karan Rhodes, Shockingly Different Leadership (SDL)
13. Measure What Matters Most To You
Measuring what matters most to you when saying “yes” to an opportunity will allow you to come to the best answer. When I am deciding whether to move forward with an opportunity, I create four categories—influence, income, impact and joy—and score each on a scale of 1 to 5 to determine what the risk will bring. Then, I examine what it will cost in terms of time, money and relationships. – Lisa Marie Platske, Upside Thinking, Inc.
Read the full article here
