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Download: Managing Risk
Each and every one of us has at one point, or another faced a situation, where we had to make a tough decision involving varying levels of risk. When such times come, the automatic response is often to immediately withdraw from the situation.
We tend to shy away from risk-ridden situations. We become risk averse. Our instinct is usually to avoid taking risks. To be safe. This is often an automatic response. Although this automatic response makes us feel safe, we need to examine each situation on its merits or demerits.
There are times when it is prudent to shy away from high risk situations. But not all such situations demand the same response. Before we can decide one way or the other, we need to uniquely take stock of every decision we make. We need to understand why our automatic response is to shy away.
Self preservation is a drive that is deeply ingrained within all living beings, with the exception of most plants. We are built to withdraw from situations, and circumstances that pose a threat to our existence.
This drive also helps us navigate dangerous situations that, even though they do not pose a threat to our lives, may have negative or adverse effects on it. When such situations arise, we automatically try to play it safe.
Playing it safe is a good strategy to steer us clear of harm, whether for our personal safety, or from a situation that can result in loss. The only downside is that sometimes, depending on the circumstances, this may not be the best response.
But why do we default to playing it safe?
One of the main reasons we play it safe, is because we are afraid we might fail. This fear is so powerful a drive, that it holds us back. It is so fundamental in fact, that our body also presents a real physical response to fear.
Fear of failure has killed many dreams, and stunted a lot of potential. Maybe you thought of starting a business a long time ago, but you keep postponing moving forward, because you are paralysed by fear. Maybe you wanted to go for that college degree, but you are afraid of failure.
Another reason we play it safe is our conditioning, that started from childhood. Our upbringing may have conditioned us to play it safe. From the time we are infants, most of us have been taught, through our families and society, to always play it safe. This type of conditioning has a powerful hold on us well into adulthood.
We have been conditioned to avoid risk, and always make sure it is safe before taking a jump. This makes sense some of the time, but can also be crippling. We can be so conditioned to playing it safe, that we avoid all risky situations, regardless of the potential and size of the reward.
It is a paradox, but not all risky situations are signals for us to avoid them: and play it safe. In fact, high risk situations often present opportunities for growth. We often grow more from taking bold and risky decisions, than when playing it safe. Within reason of course.
Sometimes, the bigger the risk, the greater the reward. I am not saying we should take foolish risks. Not at all. What we need to do, however, is to take more informed and educated risks. Informed and educated risks are driven by taking a logical assessment of every situation in the absence of fear.
When faced with taking a risk, sometimes, you will find that the bigger the gain you stand to make, the bigger will be the risk you would have to take. Of course this is not true all the time, but each situation has to be analysed on its merits or demerits.
If you think of it in terms of investment in a business, there is always a risk that the business will not generate a positive return, and you will lose out on your investment. At the same time, if the business succeeds, your gains will be proportional to the size of your initial investment, and also proportional to the level of risk.
It therefore becomes crucial to effectively manage risk. You should have a system in place to help you manage risk, and navigate risky situations. Your system will put you in a position to know when to take risks, and when to avoid them.
As mentioned above, educating yourself on the risks you face, and making informed decisions as a result, is the best bet you have at managing and navigating risk. If you understand the situation, you can weigh the level of risk, and assess your options.
By thoroughly understanding the risks you face, you are in a better position to gauge whether the benefits in taking those risks, outweigh the downsides of taking those risks. By moving from understanding, you are better able to move forward, with confidence. Taking educated and informed risks, helps us take actions that are neither driven by fear, nor societal conditioning.
Take the example of window cleaners cleaning a skyscraper. To the average onlooker, this seems to be a very risky endeavour. To the cleaners on the other hand, what they are doing is fairly safe, because they truly understand the risks involved, and as such, they have invested in harnesses and pulleys that dramatically decrease the risks they actually face.
Most of us are wired to avoid risk at all costs. This conditioning can be crippling, if you are in business or are thinking of starting one.When you operate from your instinctual conditioning in business, you will most likely not take the necessary risks required for growth.
They say fortune favours the brave. We must, therefore, boldly move in the direction that promises big rewards, in the face of fear and conditioning, that predispose us to being risk averse. Of course, we must always do this from the point of being informed and educated of the level of risk involved.
When facing a risky situation, you will feel an overwhelming pressure to run: in the opposite direction. This response is automatic, but should not always be heeded. You should recondition yourself to always take a moment, to assess whether the fear is valid, or not. If the fear is valid, then by all means, run from the situation, as fast and as far as possible. If not, run towards the situation, and you will most likely benefit more: the bigger the risk.
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