“You can’t be successful in business without taking risks.”
― Adena Friedman, President and CEO of Nasdaq, Inc.
Risks can lead to positive outcomes like engaged employees, brand awareness, enhanced brand image, revenue growth, higher stock prices and so on. Adena Friedman’s quote rings true simply because starting a business is a risk from Day 1. It is unlikely anyone can predict an outcome with 100% confidence. Success is never guaranteed, but the ability to distinguish between a worthwhile risk and an unnecessary one is crucial for any business leader.
What are ‘Unnecessary Risks’?
Unnecessary, foolish and/or unethical risks jeopardize the integrity and sustainability of a business.
- Fudging numbers to meet standards.
- Using misleading information in ads.
- Making rash decisions based on hearsay alone.
- Stealing intellectual property.
These actions make the business vulnerable and can have severe repercussions. For example, “shrinkflation” is a hot topic these days. Companies keep prices the same by reducing product amounts, which many consumers find deceptive. Raising prices is not welcome news but it does allow for transparency, making the change obvious to shoppers.
Making Informed Decisions
To make smart decisions and avoid unnecessary risks, follow these steps:
- Collect data: Gather all relevant information, both qualitative and quantitative. Seek input from employees and other stakeholders for diverse perspectives.
- Evaluate assumptions: Use past experience to understand the risk and critically evaluate your assumptions to ensure they make sense.
- Weigh risks vs. rewards: Assess if potential benefits outweigh the risks. Can your business handle the worst-case scenario?
- Evaluate potential consequences: If the consequences of failure are minor and the potential gains are significant, just do it. For risks with severe potential fallout, take time to explore all options.
- Set success metrics: Define clear metrics to track the success or failure of the risk. Check these metrics regularly.
- Plan for Contingencies: Be ready to pivot if necessary. Have a plan to mitigate any negative outcomes.
Consequences of Neglecting Risk Evaluation
Failing to evaluate potential risks can lead to serious consequences:
- Inability to meet your business goals.
- Damage to your brand reputation.
- High employee turnover.
- Strained relationships with partners.
- Lost contracts and customers.
- Decreased revenue.
- In extreme cases, legal action and/or bankruptcy.
Today’s fortune cookie wisdom reminds us to carefully evaluate risks. By making informed decisions and considering the potential consequences, you can navigate risk-taking and steer your business towards sustainable success.
- Have you taken a risk resulting in a great outcome?
- A not-so-great outcome?
- What lead you to take that risk?
- Was it worth it?
A version of this post was published on LinkedIn, 2024-07-26.
For details on the FCF (Fortune Cookie Fridays) theme go to:
https://rollingsandsconsulting.ca/2024/07/12/introducing-fortune-cookie-fridays/
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© 2021-2025 Tracey Copeland, Rolling Sands Consulting.
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