How do you feel about risk? Do you know it’s something you have to face but can’t bring yourself to? Here’s how I became more comfortable with risk management.
I spend a significant part of my life helping other people overcome fears. In my clinic, I treat everything from general anxiety and OCD to post-traumatic stress disorder and specific phobias of heights, snakes, needles, buttons and goodness knows what else.
The core of any successful anxiety treatment is helping the client to recognise and challenge the underlying thoughts and beliefs which are sustaining that anxiety, and getting them to focus their attention onto more positive thoughts and possibilities.
For the past eight years, I would say I have been utilising this concept almost every day. As such it came as quite a surprise when, a few months ago, I realised I was guilty of the exact same thought patterns when it came to risk.
Risk is an unavoidable part of life whatever line of work you’re in. And it comes in all shapes, sizes and likelihoods:
- Big business decisions that require stepping out of your comfort zone.
- The possibility of a client choking on some peanuts from the vending machine in your foyer.
- Being struck by lightning on your way to the car.
Despite knowing the above, when it came time for me to make a big business decision, I found myself steering towards the safer course of action. And not because of any sensible awareness of risk or reasoned decision-making. More because, in my head, I kept imagining the worst case scenario and focusing on the possibility of things going wrong.
The situation was this: I was weighing up the possibility of upgrading my clinic to larger premises and taking on extra staff. The rational part of me knew it was a pretty sound business move. But, I couldn’t stop my mind from seeing it in the worst possible light:
- What if you can’t get the staff?
- What if you don’t get the number of new clients you’re expecting?
- What if something happens and you can’t afford the lease on the new building?
My preoccupation with the negatives was interfering with my ability to make good decisions. In other words, I was doing all the things I’ve counselled my clients not to.
Theory vs Reality
You probably know all about different theories of risk management. Here’s a quick recap of the “big four” strategies:
- Avoid – position your business to cut out the risk altogether.
- Reduce – decrease the odds of something bad happening, particularly in relation to common day-to-day risks.
- Transfer – find an alternative way of covering potentially large risks, e.g. via insurance against them.
- Retain – acknowledging the risk as part of your business model and continuing on regardless.
You might be aware of this research about the best way to tackle risk management, in the same way, I was aware of different theories for tackling anxiety. But, how do you get from that place of knowing something to be true to a place of living it?
Identify the dodgy thinking
My first step was simply examining my decision making process more closely and trying to spot the places where anxious or irrational thinking was causing disruption. Assessing your thoughts about any potentially risky or dangerous situation involves spotting certain flawed assumptions your brain can get caught up in. This can be things like:
- Overestimating the odds of something bad happening (this plan is guaranteed to fail).
- Overestimating the consequences of something bad happening (if this plan fails I will end up broke and will have to give up on my business).
Once I had identified the areas of my thinking that were bogged down by unrealistic assumptions I could work on changing those assumptions using evidence from my previous experiences.
- Yes, I was concerned about my new plan going wrong, but, similar strategies had worked for me (and others) in the past.
- If it did fail, so what? I had the resources and the experience to pick myself up and move on.
Realistically, the worst case scenario wasn’t all that bad – and by repeatedly telling myself this I eventually started to believe it.
Changing your perspective on risk management
The other thing I looked at – again, borrowed directly from ideas used in anxiety treatment – was shifting my focus away from negative consequences and keeping my eyes on the potential benefits.
Now, to do this you have to separate those risks which offer a potential for gain from those which are only ever going to hurt you. Expanding to new premises brings with it all kinds of potential for growth, but things like having your computer systems hacked or someone suing you over choking in the foyer or spontaneously combusting are only ever going to be bad.
What does it look like to deal with the latter kinds of risks?
Most of the time it looks like spending hours on decidedly un-sexy things like filling out risk assessments, getting your safety certificates up to date and making sure your insurance is watertight. Real edge-of-your-seat stuff which I won’t bore you with here.
But, when you identify the risks which do pose a real opportunity for growth and success, it really helps to focus on the good side of the ‘What if?’ spectrum.
- That big new business venture might totally crash and burn, but what if it doesn’t?
- What if it goes exactly as well as you’re hoping?
- How much money will you make, how many new clients could you take on, how much happier would it make you?
Setting yourself to manage risk responsibly
I’m not suggesting you delude yourself by only thinking about the good outcomes and ignoring the possibility of things going wrong. But, if your primary focus is on the potential opportunity rather than the imagined catastrophe then you’ll be far better positioned to engage with risk comfortably rather than avoiding it by default.
Once I got myself used to this way of thinking I eventually made the plunge and am currently in the process of upgrading my clinic and expanding the business in all kinds of exciting ways. Has all that risk paid off? I’ll let you know. I’m very much in the middle of the story right now and it’s too early to tell.
But, at least I’m in the story, not watching from the sidelines because needless fears about risk are holding me back.
What are some of the things you do to tackle risk management in your business?