Can you distinguish one from the other? Learning how to balance the pros and cons and make well thought-out decisions for your company requires honing your risk calculation skills.

Good risk vs. bad risk

Understanding the fine line between the two can mean the difference between wise business decisions and careless mistakes.

Many people grow up believing risk-taking is a negative trait. Parents, teachers, and administrators identified the rebellious kids in school or the naughty children at church as a problem, but these individuals may also have been risk takers.

And risk is an essential part of life. Whether people internalized those youthful lessons that rebellion and risk-taking are bad will affect how they conduct business if they become CEOs and executives.

When individuals grasp the healthy aspects of taking risks, they can begin to develop methods for taking smart risks to improve their business.

An object lesson

Igor Salindrija, successful entrepreneur and CEO of, has experience with taking risks. "My business model is simple: make decisions today to set yourself ahead of the competition in the future," Salindrija says. "I know the rewards of taking calculated risks, and I regularly push myself to step outside my comfort zone. It's a formula that has worked for me, and it's what I advise other CEOs to do as well."

Beneficial risks require careful planning. Bad risk tends to be a product of thoughtlessness. Fortunately, most CEOs and business owners wouldn't have arrived at their current position if they regularly made the latter type of decisions.

Good risk is the product of assessing needs, identifying areas that need improvement, formulating strategic plans, and executing initiatives while anticipating mistakes.

How to take calculated risks that will be successful

All successful business owners must learn the art of taking calculated risks. The practice may not come naturally, but it's essential for progress and longevity.

Follow this step-by-step guide to make productive decisions for your company.

  • Understand the value of risk in business. Risk-taking is a necessary part of any business model. Without it, little is accomplished and customers quickly become bored with your product, service, or program. Not only does risk open up the door to new possibilities, but it also shows your audience the firm genuinely cares about the industry and users of its product.

For a business, risk can uncover new markets, new audiences, and new capabilities. Risk forces leaders to set aside their fears and take strides toward future success. Many people are tempted to give in to the voice in their head that says, "this isn't the right time" or "this didn't work last time." Learning to move past such insecurities will lead to new levels of success.

  • Stop overanalyzing. Leaders become paralyzed in the business world when they spend too much time worrying about consequences and potential mistakes. Overanalyzing details before the plan is set in motion halts progress and weakens the potential of the company. Consistency is different from predictability.

Leaders should work to maintain relationships and communication, but push past the details and take action. It's wise to meet with advisors and conduct brainstorming sessions for future initiatives, but you also need to get past the planning phase if you're truly going to make a difference in the future of your firm.

  • Identify the risks. Part of the brainstorming session should be devoted to identifying possible risks. A large part of taking calculated risks involves pinpointing the potential negatives and forming plans for putting out fires after the implementation. By evaluating risk in advance, business can more accurately aim for success. On a practical level, consider the cost and business benefits alongside the possible losses if the initiative fails.
  • Anticipate mistakes. Before executing any plans, prepare for errors. They are an inevitable element of risk taking, and key players in business must be mentally ready to handle the consequences. Accept the possibility of total failure, and develop creative ways to handle it, should it happen. Realize mistakes indicate the presence of risk, which means the company is at least moving in a new direction. Mistakes are a natural part of the process, and learning to handle them gracefully is just as important as taking a risk in the first place.
  • Determine what you can afford to lose. Companies that know they can't afford a large flop should start with baby steps. Take small risks to test the water and gain confidence. This should help you build a higher tolerance for risk, which means your business will trust itself enough to take larger risks in the future.
  • Develop a detailed plan. Although unknowns are inescapable, developing a detailed plan for each step of the process can help it go more smoothly. Every part of the plan should be considered meticulously, from finances to marketing. Such planning lowers your risk and creates a better chance of success.
  • Take the jump. The final and most important element: Take the risk! After all the careful planning and detailed consideration, start implementing the plan and watch the results come to pass. The results might be different from your expectations; the plan could fail completely or enjoy unexpected pockets of surprising success.

Regardless of the outcome, you should continue to accept the process of taking risks as a beneficial function of the company's game plan. The practice of risk-taking ultimately builds confidence and success as a firm learns to set itself apart from the competition.

Published on: Sep 17, 2014