Chizubel Egwudo business’ founder and CEO of The Risk of You, is widely regarded as ‘The Risk Champ’, He boasts a proven track record in helping some of the top global companies – including Deutsche Bank, Lloyds Banking and VISA – build risk capability and grow their financial base. In this article he discusses the need for business owners to develop a proactive risk mindset in order to achieve success, and how the misconception of risk is preventing business owners from taking them.
According to a report by Deloitte, companies that view risk management as among the most important factors for achieving strategic goals tend to achieve higher growth. Yet only 36% of organisations have revealed that they plan to increase their investment in risk management over the next two years.
Not only does this imply the majority of businesses fail to have a proactive and strategic growth plan in place, but it also highlights that there is an inherent misunderstanding of risk and the benefits it can deliver to businesses on both a national and international scale.
Indeed, this is effectively demonstrated by the fact that 95% of business leaders associate the concept of risk with negative connotations, believing it to represent potential problems that needs to be prevented or avoided as opposed to seeing it as a powerful transformative activity interwoven with business operation that overcomes challenges and drives impressive business growth.
As such, it could be argued that it is in fact the misconception of risk that prevents business leaders from taking them, let alone embracing a purpose-driven approach to risk management and risk exploitation. Let’s explore:
The Spectrum of Risk
There is a spectrum of risk that is misconceived, and this misconception is responsible for missed and lost opportunities worth billions of pounds in revenue and profit. There are four elements of the spectrum of risk. They consist of:
- Threats: these are potential problems not yet realised.
- Issues: these are real-time problems happening now, causing disruption in business-as-usual and losing you money.
- Opportunities: these are potential rewards not yet realised.
- Benefits: these are real-time benefits measured in money earned from opportunities exploited.
The biggest misconception of risk arose from the dilution of these element into one, thereby creating the misguided notion that risk represents something bad that is going to happen. This dilution began in the mid 90’s and accelerated right after the 2008 financial crisis because more focus was given to the prevention of loss.
Catastrophically, most professional bodies teaching risk leaned into this to cater to the training and skills demand of organisations for risk management only. Opportunity management and benefits realisation became a lost art ending the era of conscious risk exploitation activities. Why was the money-making part of risk discontinued? Your guess is probably as good as mine.
What we have today because of this is that many companies resolve to a spend-to-resolve approach to potential problems and issues, not knowing how to actively find related and sustainable opportunities, failing to implement benefits realisation activities to convert opportunities to rewards or actual benefits. The impact of this was largely felt during the financial crisis associated with the coronavirus pandemic.
“You cannot be rich based on having opportunities no matter how much they are until you convert them to measurable benefits, that is, money, profit, growth.”
This is what risk is, dynamically applying it means that in the pursuit of success, you operate every element of risk.
Developing the Right Risk Mindset
The key to embracing risk and to integrating it strategically into your business, is by developing the right risk mindset and being proactive about it, where the following is vital to success:
Establish Purpose:
For business leaders to embrace risk, it’s important to know that risk is a person or an entity (business) with a purpose – once you establish a clear purpose and everything you do is aligned with it, risk is no longer perceived as a negative activity and instead a powerful philosophy coupled with the right risk activities that delivers positive results.
Understand Value:
Risk in its entirety needs to have powerful value proposition for every company. Without it, your workforce, including the executive team and board will have a hard time buying into it fully. The business case for risk should be convincing, projecting value and a demonstration of return on investment. When implemented and embedded correctly, risk enables businesses to transform periods of downturn into growth, overcome any financial, operational, or reputational difficulties and, importantly, enables profits to soar.
Proactive Vs Passive:
As the world moves from one issue to the next, it’s simply not wise to wait things out, hide away and hope that things will soon be over so you can achieve growth. Companies must learn to embrace opportunities in any climate, and those able to do so with the right risk mindset will reap greater rewards.
Embrace Failure
When taking risks, there are no absolute guarantees of success. Failure can still happen, even with the best of planning and intentions – but it also serves as a valuable teaching tool that will pave the way for future triumphs. Lessons Learned. In every failure there is an opportunity or more if you evaluate closely.
Ultimately, the best business leaders understand that risk is not about throwing caution to the wind and taking reckless chances. Rather, it’s about making proactive choices and taking calculated steps towards greater success. Embracing risks enables companies to step out of the shadows of mediocrity into the spotlight of innovation and profitability.
So, as you embark on your business journey, remember that taking risks is not just an act of valour – it’s a strategic dance that can lead to enormous profit. As the saying goes, nothing ventured, nothing gained, and for those focused on success, developing a proactive risk mindset is a positive place to start.
https://theriskofyou.com