Control Your Level of Risk

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Whether or not you’re aware of it, you’re a risk taker.

At bottom, risk is simply exposure to uncertainty, sometimes laced with danger. Every time you make a decision or take an action, therefore, you’re exposing yourself to some level of risk.

This risk comes in many forms, including but not limited to ethical, emotional, financial, legal, reputational, and physical.

That’s why you should try to make more careful, conscious choices as you face the possibilities of taking on higher and higher levels of risk. To better manage your daily level of risk, here are some of the questions you should strive to answer:

How Much Risk Is Acceptable?

This is actually a two-part question:

Part One: How much risk is involved in the decision or action I’m considering? There’s no single right answer, of course. Running a red light or bungee jumping over Victoria Falls are among the many decisions and actions you can choose to take. Different people may reach different judgments about how much risk these and other actions may entail. As long as you’re in the right ballpark, however, what’s most important is the level of risk you perceive.

Part Two: How much risk am I carrying, overall, and would accepting this new risk put me over my limit? In a sense, each of us has an overall capacity to shoulder a total risk burden without becoming fearful, unhappy, or otherwise less able to cope. Call it your “risk budget.” If you’re already near the upper limit of your risk budget, then even a small additional risk can put you over the top. On the other hand, if you’re presently carrying very little risk, then even a massive amount of new risk may be entirely acceptable.

What’s this Risk’s Timetable?

Risks tend to come and go at various times in your life. They rarely last forever. This brings timing and scheduling issues into your process of accepting and managing risk.

Since your risk budget undoubtedly varies from week to week, month to month, and year to year, you may find some risks unacceptable now but worth reconsidering in the future. You may prefer short-term risks rather than longer-lasting risk burdens. Be aware that some tasks, projects, and efforts toward goals contain periods of relatively little risk interspersed with periods of extremely high risk.

In some situations, these timing and scheduling issues may prove even more important to you than the raw level of risk involved.

What Do You Know About the Risk?

Imagine being asked to thrust your hand into the opening of a sturdy, tightly closed box. If you don’t know what’s inside that box, you can’t possibly evaluate the level of risk you’re being asked to accept. It could contain a tiger, a puppy, a thousand dollar bill, or anything else.

Clearly, knowing as much as you can about the risky situation is a vital part of deciding whether or not to accept exposure to it.

This is why it’s often easier to assess the risk in situations where you have some expertise and/or experience. This also provides a strong reason to investigate a risky situation so you’re better equipped to evaluate it.

What Can You Count on In the Risky Situation?

You can never know everything about a risk, and some of what you do know or believe about the risk may be wrong. Even so, it’s prudent to exercise due diligence before you commit to any situation involving uncertainty and the possibility of danger.

This due diligence involves two levels of consideration:

Level One: How much do we know about the risky situation? How bad are the possible penalties or dangers? Can we find out any more?

Level Two: How sure can we be that what we find out is reasonably or entirely accurate? We can be fooled, of course, intentionally or unintentionally. And sometimes “hard evidence” is misleading or confusing on the way into a risky situation. Yet most of the time, if we look closely enough we can get at least a good “feel” for the parameters of a given situation and then use our experience and judgment to understand more about the likely risks and what they may entail.

Over the years, how well and prudently you control your level of risk will have significant implications for your productivity and success in both your work and your life: too much risk and you open yourself to major penalties and setbacks; too little risk and you limit your potential for accomplishments and rewards.

With the answers to these questions in hand, you have a better chance to keep your level of risk in the sweet spot where you are most comfortable.

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