3 Ways To Know When Risk Is Right In Business

Some things in life, you just know. When you are in love with somebody you just 'know'. When you've found your dream house, you get a 'feeling'. When you want that last slice of cake but you 'know' you shouldn't have it (OK so maybe our jeans let us know about that one more than our brains!).

However, in some areas of life, it isn't as simple or straightforward. In business, for example, there are multiple factors and apparently, multiple systems and analytical processes to use to work out how to move forward. And yet, in some situations, highly influential people like Richard Branson and Alan Sugar talk about trusting your gut. Things get even more complicated when you're not only posed with a big business decision but when you potentially have to take a risk in business. Now the stakes are even higher along with the crippling pressure to boot.

Despite the recession being officially over, 8 in 10 companies still fail within the first year. So there really isn't room to just trust some analysis programme, or to 'go with a feeling'. How could you justify such a limp decision-making process to anybody invested in your business, should things go wrong?

So when you are faced with potentially taking a risk in business, how do you know when to go for it or not?

Your Intuition Isn't Everything, But It Is Something

Although you can't base everything on your gut feeling, if your gut is literally playing a complete brass band set complete with screaming vocals and perhaps even a ship horn as well, just to get your attention, the chances are, subconsciously at least, you know more than you think. A well-published study by Gerard Hodgkinson found that intuition can be really helpful in certain situations. For example, when you need to be speedy about your decision or when you know the subject inside and out. So if the business is yours and you do know it inside out, you might instinctively know when it is right to take a risk.

If you are anxious or extensively stressed though, you may well have tuned out your 'inner voice' or it could be a small voice in a see of to do lists. In this instance, consider doing some meditation or even just taking some time out just to allow your instincts to tune back in. At the very least you'll be more relaxed and able to handle stressful business decisions coming your way. At the most, you could tune in to vital feelings and information you had all along. You could have your very own Limitless moment without the pill!

You Can See It Working

Unless you're incredibly optimistic, or more optimistic than realistic, then the fact you can see the risk working is a good thing. Belief in the outcome is a really good thing and it suggests that you have looked at the process to get there and understand that there is a real chance it could work. This feeling is to be listened to if it isn't wishful thinking which is very different and definitely not a good idea to base decisions on!

You're OK With Failing

Often a fear of failure causes businesses to avoid doing anything at all, which causes things to be stagnant. In some instances, it is OK to fail in business and the risk of failure is acceptable because you know that a negative outcome won't be the end of the world. For example, you might know that invoice discounting to fund a large order that has come through is strongly betting on clients coming through with payments, but you're also OK with some level of debt if it doesn't work out and if it does work out, the new client order will allow your business to grow and expand exponentially.

There are a couple of ways to figure out if failure is acceptable with your business decision. One way is to think hard about the worst possible outcome. Could you get through it? What would the consequences be on you and other people?

If the risk is more substantial or involves multiple people and their money, you may need to look deeper into their feelings of failure. In both instances, the more you have considered the failure the more you will be able to actually think about what happens if things do fail. This approach helps you to almost remove the risk, at least emotionally, because you will know that either way, things will be OK in the end. It could also help you recognise that actually, you're not OK with failure, which should help you minimise the risk, or potentially steer away from it in this instance because the reward is not enough.

Turn Reckless Risk Into Measured Risk

There are endless ways businesses turn failure around, and also countless stories of businesses taking risks that pay off BIG TIME. It is also not hard to find stories of business owners who have ruined their companies. Annoyingly it seems as if the risk pays off everybody will sing your praises, but if it fails you'll have an endless sea of 'I wouldn't have done that'.

Ideally, you will go through every single way of considering your options and assessing your business risk before you take it. Intuition, visualisation, fact analysis and seeking advice from mentors and peers. Everything is relevant when it comes to making the right decision for your business, so that ultimately when it comes down to it, win or lose, you can know in yourself that you really did think it through and made the best decision you possibly could at the time.