Taking a risk always involves the potential for loss, but it also has potential upside or gain. Without the potential upside, one wouldn’t even consider the risk. That means different things to different people. I see bungee jumping as a crazy risk; there is no upside for me. For another, it could hold great upside – they could relish the freedom of falling through space or the ability to say they’ve accomplished this dream.
Understanding risk and your reason for taking risks is important as you make leadership decisions in your business and your life. The dictionary definition of risk is:
- the possibility that something bad or unpleasant (such as an injury or a loss) will happen
- someone or something that may cause something bad or unpleasant to happen
- a person or thing that someone judges to be a good or bad choice for insurance, a loan, etc.
These definitions all seem negative to me. Granted, risk can have potential negative outcomes; however, not taking a risk can have negative outcomes, also. Sometimes, the bigger risk is staying the same.
I’m defining the term risk a little differently. Risk is the factor you consider in deciding where you are on a continuum between danger (loss) and opportunity (gain).
To determine where you are on the risk continuum, you need to identify the WHY for your risk. WHY take the risk? Is the reason worth the risk? What causes you to get up in the morning and keep working toward your goals? WHY do you keep leading this organization forward?
Simon Sinek refers to your WHY in his TED talk, How Great Leaders Inspire Action. He refers to the Golden Circle of Why, How, What. We are good at the “What”, the factual side of what we do. It’s the “How” and most importantly, the “Why” that cause us to stumble, but that’s where the connection is. That’s where we find the purpose, the context and the emotion that motivates self and others to do what matters and make a difference.
Sinek says, “But the inspired leaders and the inspired organizations — regardless of their size, regardless of their industry — all think, act and communicate from the inside out.” Most leaders and business owners have experienced a share of sleepless nights contemplating a new risk they were taking. When you know the WHY for taking a risk:
- You know your risk tolerance, how much risk you’re willing to take.
- You can measure the costs, both financial and opportunity costs.
- You can accomplish your due diligence.
Identifying the WHY that underlies your actions helps you place your risk on the continuum of danger vs. opportunity. A risk that involves great danger, but that involves a WHY for which you are willing to lay down your life fuels risks that others who aren’t committed to your cause would never understand or support.
That being said, any new thinking, product, service or opportunity has come about because someone was willing to be different, take a stand, deal with others not understanding why they are doing what they do. With a WHY that fuels your actions; you will find ways to manage risks, taking those that are most important in order to accomplish your goals.
For today, what is the WHY that makes you willing to take a risk? What makes you put your neck out there and be different, stand out, or as Seth Godin calls it, “Do your art?”