As people move forward on an investment the need for leadership to set risk is critical. In both the private and public sector the ability to articulate risk and guidance for accepting and guidelines for risk remains elusive. Some good general guidelines to follow. 1. Define Risk tolerance. Where are you willing to accept the risk and where you are not? 2. Define where to minimize risk and when. This is time and condition dependent. If you can define it, it indicates you have correctly defined the problem in a manner where a solution that can have some degree of success can be achieved. 3. Risk exposure can shift as conditions shift if one can articulate the conditions upon which you are willing to accept more risk do so for your stakeholders. 4. Risk cannot be destroyed it can only be moved and capped because in every situation there is a limited amount of resources. 5. Accept that Risk will never go to 0. 6. Risk reward is a factor but that is an assumption. There is a high penalty if the wrong àcan you accept that? 7. Don’t be risk-averse, be risk aware. Nothing worth doing is free of risk. The ability to handle failure is best done if you are aware of risks. People who did not recognize or conceptualize the possibility of risk existing in a certain situation are what usually causes the most acrimonious responses. Expectations of risk and the ability to articulate risk is a skill. To be good at it is a rare skill. When talking about risk to your stakeholders. – State where you are willing to accept the risk. Also, state if the risk level is throughout the process or if there are times you can accept greater risk at different time periods given certain conditions. – Tell the team when you would like feedback and what decisions can be made by the team and what decisions they must come back to you for. – Numbers don’t always tell the story. While numbers may look great they never tell the whole story. Human nature and its flawed nature means that there will always be the risk. As long as humans are in the loop risk will exist. A good example of this is the stock market. A company may report fantastic numbers but the emotional and animalistic tendencies overcome the logic and facts that numbers provide.
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