From a business perspective, there are good and bad risks. Every opportunity that creates value can be considered a good risk. Bad risks include ignoring regulations or failing to implement effective policies and procedures.
Successful business owners understand when to take a risk and how to balance that decision with the potential reward. A good risk can bring new markets, new people and new possibilities.
Some managers tend to over analyse risk, spending too much time thinking about potential outcomes and probable mistakes. This type of over analysing can lead to paralysis – where managers don’t make decisions because they are too wary of the risks.
The best businesses make mistakes but are better at correcting things when they go wrong (and are good at learning from them). A big part of risk management is pinpointing the probable negatives and creating plans to mitigate the bad risks. By recognising the negative factors ahead of time and putting the right strategies in place, the business can proceed with a greater chance of success.
Risk management is not a one-off exercise. Continuous monitoring and reviewing of potential risks is crucial.
Ongoing monitoring ensures that risks are being correctly identified and assessed and appropriate controls are being put in place. It is also a way to learn from experience and make improvements to your risk management approach as you go.
Where there is risk, there is reward. If you can identify the risks that are worth taking and put the correct strategy in place to manage these “good risks”, you will stand a better chance of success.