Risk – Of Doing Nothing
Risk is the measurement of trying to determine a perceived positive outcome: a vital key in the formula to riches. In business managing risks is when some people sit in a board room, someone has just come up with an idea they are sure will become a positive flow of money into the business. One person is designated to put that the plan together, one person is designated the person to manage costs, one person is designated to market the idea, one person is designated to manufacture or make the product. Then they decide on the next time they will meet to discuss how things are coming along.
Outsiders see entrepreneurs as riverboat gambler type risk takes, but most successful entrepreneurs only rarely engage is such behaviour; instead they learn to manage risk.
In any business the first process should be to determine whether there is a need for this new product or service, the first step to managing risk. This can easily be done by ‘Testing’ Lee Iacocca did this testing by cutting the hood of a sedan with a blow torch, taking it for a drive around town to see if the girls would look at it. His thoughts were “if the girls like it because it looks like a sports car”- it will sell. He did this while avoiding bankruptcy for the troubled Chryslar corporation. No time for sitting in the board room.
The 2nd step should be about the maths- It’s a simple question- does the cash and money flow into the bank account, rather than out since we are in business to make money. The rate and how quickly this flows into the bank account can be forecast easily using internal rate of return. Is it possible? Can I make it Happen? Can I control are three question that will reduce your risk to almost zero.
3rd you need Decisiveness. If you read Iacocca’s book or have read articles about him you see the thread running through his career and managerial style. He was met by a partner of mine, during a 2 hour business meeting. He noticed that Iacocca kept guiding the conversation to decisions. Ingrained behaviour, this is opposite of the behaviour I see exhibited by most executives as well as most people in general. With one corporate client I work with, indecisiveness is so endemic that meetings are frequently held with the only result being the scheduling of yet another meeting, one teleconference’s outcome being the date of another conference and all too often the same basic conversation dragged up over and over again.
They are obsessed with trying to make perfect decisions – but success has more to do with making more decisions, faster than your competitors than with making more rights decisions, and making the decisions turn out right. Risk of risk management is that no decisions are made at all.
Errors fixed move you forward. Inertia does not.
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