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The risk reward lever and entrepreneurship

27/1/2011

 
I’ve been reading, when I can, articles about risk lately. Most are written with regard to large institutional risk management, systemic risk management and all sorts sleep inducing ideas. But that’s not what I wanted to learn more about, however noble the thoughts of the writers were in most cases I think they are missing a point.

For me, working with entrepreneurs and new start-ups, is all about embracing risk and encouraging it. Because amplifying risk is a way to increase the amount of information one receives. Just like racing a car around a track. Driving within the limits is good but gives you little feedback about the car. Driving on the limit pushing hard gives you all the feedback you need about the car and its driver. High risk, high feedback. In business the feedback is vital, it's our market research and all those customer interactions (or lack of them!).

Obviously there is a balance that needs to be struck because there is a limit to the availability of funding and or time. Let’s imagine a ‘risk lever’ with the entrepreneur pulling one way towards more risk (for more reward) and on the other side we have funders (banks et al) on the other side trying to reduce the risk in order to protect their investment and secure their return. Who's going to win? The winner is normally the one who proves his results. 

A good entrepreneur like a good engineer will seek out where the failure points are so that the risk of operational failure is reduced. My mantra for the last while has been to research the idea in order to seek out the risk and reward balance. Put in the hours push the envelope and ask the hard questions.  

Then and only then, go forth and take that risk!

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    Mark is a management consultant and professional mentor helping companies and individuals achieve their goals.

    View my profile on LinkedIn


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