Taking Smart Risks

By Brian Tracy

All of life is a risk of some kind. The issue is not whether to take risks, but rather how to take the right risks for the right reasons in pursuit of the right goals or objectives.

Risks fall into five basic categories:

• The risk that can be avoided simply and completely: the decision that does not need to be made or the gamble that does not need to be engaged in.
• The risk that is unnecessary. An unnecessary risk is when one acts without sufficient information or without taking time to think things through carefully.
• The risk that one can afford to take. Calling on a new prospect, following up on a lead, or exploring a new opportunity are risks that can afford to be taken. The cost of failure is very low, while the rewards of success can be very great.
• The risk that one cannot afford to take. The consequences of making a mistake would be too enormous. One cannot afford to bet the company on a single speculation.
• The risk that one cannot afford not to take. The downside may be costly, but doing nothing is not an option.

People who have achieved a high level of success are intensely realistic. They carefully calculate every possible risk, then think about what they would do should it occur. They always have backup plans and options that consider all variables. They also engage in strategic thinking. They minimize risk and avoid being caught unprepared, by continually questioning their assumptions and considering the effect of unanticipated delays, cost overruns, or unexpected actions by other parties.

A valuable exercise in any situation involving uncertainty is to identify and evaluate the worst possible outcome. Murphy's Law, “Whatever can go wrong will go wrong,” has several secondary laws, such as “Whatever can go wrong will go wrong at the worst possible time,” and “Of all the things that can go wrong, the most expensive thing will go wrong at the worst possible time.”

After identifying the worst-case scenario, engage in crisis anticipation by assessing what can be done to offset negative factors. One effective way to develop the ability to take intelligent risks is to consciously and deliberately do things one fears, one step at a time. This approach counteracts the natural tendency to slip into one’s comfort zone. Many fears of taking risks have no basis in reality.

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Brian Tracy is a speaker, author, and consultant (www.briantracy.com).