Managing risk is critical to business and personal success. We saw it in how Wells Fargo’s business practices resulted in fines and loss of customers. Fox News has seen its franchise diminish because it failed to consider the impact of not addressing sexual harassment in the workplace. Hospitals, insurers and providers are in a state of panic thinking about another major change in health care models.
Risk tolerance is not just for business, however. It is also for individuals.
Our ability to take risks is directly tied to resilience in that we may be fearful of taking on certain challenges or wanting to avoid danger because we are afraid that we may not be able to bounce back (or forward) from that event. As we’ve said before, resilience is hard-wired into us so we can almost always take on more risk than we think.
Here are 3 things to keep in mind as you evaluate your risk tolerance:
- Know your big picture. In business it will be your company’s strategy. In life, it’s about whether your life goals are about getting your kids educated or traveling to new places.
- Check your experience of dealing with risky issues. Consider how you’ve handled difficult situations in the past. If you are energized by challenges, you may have a higher risk tolerance than if you choose a path that is more travelled.
- Create some scenarios that let you play out how different choices will lead to different outcomes. Our negativity bias usually leads us to conclude the worst outcome. Make sure you target best outcomes and go for them.
Understanding the role that risk management plays in our lives helps mitigate stress and strengthens resilience by showing us what we can handle and where we can take on more challenges. Don’t be afraid to leap, but do go ahead and look.
© Richard Citrin, All rights reserved, 2017