Do you feel nervous while taking any personal or business risks? If yes, don’t worry because at that time all are nervous.
But there are two types of risks we can consider. One is that we did not think so much about that action’s advantages and disadvantages, and we did it.
But there is another type of risk, where first we understand the action’s advantages, disadvantages properly and take any action.
We also can call it an intelligent risk. So here I discuss all the risks which we face in any business, and how can we manage them intelligently.
Which will also help you to take intelligent risks in business.
WHAT’S IN IT
Definition of business risk
Business risk is a risk that can have the ability to lower any business’s profit, or it can lead to a significant loss.
The losses may happen because of an earthquake, fire, etc. It may happen because of the fluctuations in the market price.
The risk for a business is like a never-ending process. So as long as the business continues, the risk will remain.
Types of Business Risk
There are four types of business risk we will discuss here. Strategic risk, operational risk, reputational risk, and compliance risk.
Strategic Risk
This is the type of business risk where most of the time the external factors are involved. Like, a business’s central pillar is its strategy, It means every business works according to their strategies and if they fail in it, then they can be at risk.
Suppose a business change one of its product’s feature, without conducting any market research or surveys.
But because of that product’s feature now people are avoiding that product so, the business can’t generate enough revenue and it is at risk now.
So, here we can take business risks intelligently by doing surveys and research before changing the feature.
Operational Risk
Operational risks are the types of business risk where the external factors do not involve. These types of risks arise when the company can not produce its product or deliver its service.
Due to many reasons, it can fail to produce products. It may be their machinery issues, the worker issues.
And again if the business can’t produce the required products, then the revenue decreases.
We can solve these types of problems, by quickly repairing the machines, or providing required resources to the workers.
Reputational Risk
In these types of business risks, businesses may suffer more losses. Because if a business loses its reputation, then it also can lose its maximum customer base.
Suppose a mountain bicycle company positioned its bicycle as the most durable bicycle in the world.
But one of part its has broken so quickly. And this problem happens with all the bicycles.
So here, the customer’s belief in their product decreases. And that also affects brand loyalty and the company’s reputation.
So here the company solves this problem by quickly making that part more strong and remarket that product’s new feature to regain its reputation and loyalty.
Compliance Risk
This is the type of business risk, where the business has to run its operations in specific legal rules and regulations of the country.
If a business can’t follow these rules, then it may never survive for a long term goal.
It faces legal issues, and it also affects revenue. So before starting a business, we have to know all details about the legal and environmental rules of that business.
Barriers to taking intelligent Business risks
So in personal life or professional life, there is always a risk. Sometimes not taking a risk is also a risk. So we have to take risks intelligently.
Because your success is affected by your ability of intelligent risk-taking.
But some factors affect your business risk-taking ability.
These may be fear, perfectionism, procrastination, irrationality, codependence.
Fear
Most people do not take any risk in their life because of fear. But that doesn’t mean they want to grow in life. They want to grow; they want to achieve everything in life.
But because of fear of failure or rejection. They thought if they failed then what other people say about them. And they never take any risk in life.
Perfectionism
Some people never take any risks because they are waiting for the right time to come where everything will be perfect. If we wait for the perfect time, then we may miss different current opportunities.
So if you want to do something and you know it is right for you then start it, don’t wait for the perfect time.
Procrastination
This factor is as same as perfectionism. Many people want to start something, but they delayed it. It may seem because of fear, or they are over researching on it.
Irrationality
Many people irresponsibly make decisions. They don’t even analyze the possible risks, advantages, and disadvantages properly and act.
So to make intelligent risk, we have to analyze correctly and then act.
Codependence
Some people even don’t make their decisions; they always rely on other people.
And if any event or project’s decision goes wrong, then they blame others.
So if you are head then to take an intelligent business risk, you have to involve in all the decision-making process.
So we have to avoid these factors during taking risks so you can take an intelligent risk, which helps you and your business.
Steps to take an intelligent Business Risk
Nobody is perfect while taking a risk; no one knows which plan will succeed and which not. But there are some steps by following them we can take tremendous and intelligent business risks.
Problem and Identification
The first step to take an intelligent risk is identifying the exact problem and its possible solutions.
Or we can identify different possibilities to grow business.
After that, we have to see all the possible positive, adverse outcomes and risks from that.
Taking Learning from the past
After making identifying all the problems and possibilities next, you can compare your risks to the past data.
It means we can learn from other’s past happened situations and apply that in our situation.
Create an action plan
If we decide to take a particular risk then first we must have to do a plan for it. Otherwise, we may wander or focus on any other things.
And by planning, we can get our outcome quickly.
Set a time frame
And we must have to set a time frame for achieving the intended results or outcomes.
Another benefit of time frame setting is it increases our effort level, and because of that, we also may get our outcome quickly.
Execution
Execution plays an essential role in taking an intelligent business risk.
Because many people know the business’s problem and they also know what to do to solve that problem.
And they also make good business plans for that. But they failed at execution. It may seem because of fear of failure.
But we have to avoid all the factors which stop us from making intelligent decisions and executing the plan.
Evaluation
After executing, we also have to observe what worked and what did not work for us, and according to that, we have to modify little our plan to fit in it.
Conclusion
If you are a businessman or in a job, everyone has to take some calculated risks in life. And calculated risks are good for our growth.
Do you think Dhirubhai Ambani without taking any risk he built such a vast empire?
If that were the case, then he would never have started the business. Because starting a business is also a significant risk. There are many risks that arise, whether people accept that product or not, whether it survives in a competitive environment or not, etc.
So if you want to do something and you are doing some research on it. And you decide the risk is worth taking then you must have to take a chance.
And this is called the intelligent risk-taking.
Also you can read our blog on How To Learn RISK IMPACT AND PROBABILITY CHART