The appetite for risk is an incredibly powerful topic not only in the world of business but also in our personal lives. Over the years I have learned that our appetite for risk varies so incredibly much from person to person, from experience to experience, but like all businesses, without the right balance of risk and reward management we too can fail to thrive to become the best that we can be or worse off become left behind in an ever changing world.
“The level of risk that an organization is prepared to accept in pursuit of its objectives, before action is deemed necessary to reduce the risk”Wikipedia
It’s not our fault that our appetite for risk is where it is at. A large portion of it stems from our past experiences. A child who is yelled at for speaking his truth may choose to keep his thoughts to himself the next time round. Conversely, an adult who risks driving a bit too fast to save a few minutes in life may actually take a life instead. Risk, like many things is what it is to it’s viewer.
So, is there a “right” way to approach risk? Is there a better way then just trusting our instincts from our incredibly varied and unpredictable past experiences? I say there is.
Like any great organisation that understand themselves and their objectives well, we too have to understand our ourselves and what we hope to achieve. Only by having our objectives in mind can we assess the risk we are willing to take to achieve it, that much is obvious. We know that risk is a daily action, we take risks every single day of our lives, but the real important risks we take are those with long lasting effects on who we are, the path we take, the wellbeing we add to ourselves. This is one of the things we’re not good at, we too often take risks as they spring out into our lives as if to surprise us that they were ever there. Imagine an organisation tackling risks only as they appeared and never as they predicted; oh the stress! So then, why is it that we do the same in our lives?
So firstly appetite for risk is knowing why it is worth to take the risk even when the risk has yet to appear in your life.
What we also don’t do well is seeing our risk appetite as a polarisation effect. That we “know” that a result of this risk or that, we will or will not do this. Most of us know that a polarisation of any belief is not good. To keep an open mind is the introduction of any critical thought, of empathy with another. So like so, ones risk appetite shall never be set in stone. We must understand the guard rails in which we must operate within. It is often fear/ fear of failure that drives the polarisation of why we should not take a risk and my one admiration of fear is that it is incredibly convincing, that fear’s grip makes you easily believe that what it says is true, forcing away all other beliefs that might say otherwise.
So secondly, as our world changes ever so fast, our appetite for risk must also change with it.
The last point I’d like to make is the understanding of how risk affects and is affected by our internal and external environment. With any risk we take, we must take into account the full range of benefits and consequences and not just pick those that support your own argument. This is incredibly important because too often do we refuse to accept the existence of one or the other when making decisions. The textbook definition of these considerations include; financial, health, recreational, ethical, social and information. I’ll leave it to you to think about these and where you might do better to think about.
The appetite for risk is complex because we as humans are inherently complex. We all have our views and beliefs on what levels of risk are acceptable to us; too often do we express those views to others without the full consideration of our own views. Is there a right way to approach risk? no, not really, but there often is a more better way than you may think.
Thanks for reading. What is your risk appetite?
Wishing you all the best, Jason.
Feature image – Moving to London, a risk I chose to take even against all odds and logic at the time but has defined much of who I am and what I know to this day. Taken on the 17th of January 2019.