When you make decisions each day in matters big or small, how often do you factor risk into the equation? It might seem like an unusual thing to consider, but successful entrepreneurs do it all the time. Knowing that it’s impossible to reduce the chance of failure to zero, they define the level of acceptable risk and use that to guide their choices. Here are some aspects in which being aware of risk management can improve and streamline your decision-making.
Simply by looking around your home, you could easily find examples of how the concept of acceptable risk is being applied all the time. When we decide how urgently we need to address repairs, we’re making this sort of risk management decision. A clogged drain might be a minor nuisance, unless you live in an area like Millcreek where plumbing issues may indicate more serious concerns such as broken water pipes or sewer lines. Nearly every activity in home maintenance is a way of prioritizing and addressing various small problems before they worsen to unacceptable levels; that thought may be worth chewing on the next time you’re inclined to put off a DIY job or calling in professional services.
Health and safety
We’ve all been young at some point; youthful vigor and resilience leads many kids to go about their daily lives without worrying about getting hurt or sick. Of course, there are exceptions even among children; and as people age, they learn not to take their health for granted. It’s not all about aging physically, either – as you grow older, others may become dependent on you. Taking needless risks with one’s health and safety thus becomes unacceptable for many adults. Even before the coronavirus outbreak, people were being advised to take precautions such as updating vaccinations and observing proper hygiene when traveling to countries with lower sanitation standards; moving forward, it’s vital to continue doing so as we go about in an interconnected world.
You may want to achieve financial independence, make profitable investments, or bolster your income with passive revenue streams; one piece of advice you’ll commonly hear as you do your research is that there are no shortcuts. ‘High risk, high reward’ may sound tempting, but rather than daydream of the potential payout, focus on the level of risk you’d consider acceptable. A wealthy person’s investment in a startup company is a small percentage risk; if you invest the same amount it could take years to recoup if that startup fails. In finances, building sound habits through best practices is the only way to ensure you reach your goals in time.
Most people tend to have a greater awareness of risk management when it comes to their careers. After all, our jobs dictate our next paycheck; the potential impact is immediate and tangible. You wouldn’t jump into a new position without careful consideration. But career evaluation needs to factor in long-term risks. Is it unacceptable, for instance, to stick with your job if there is no potential for growth? Your wage appreciation over time might not be enough to keep up with the cost of living and set you up for a comfortable retirement. Think of risks in the big picture and you can avoid unacceptable outcomes in the long run.
We go about our lives making all these decisions – and many others – involving calculations of risk, often without realizing it. By becoming more aware of risk management and which outcomes are acceptable, you can better avoid costly mistakes and setbacks.