One definition of risk is “a situation exposing someone or something of value to danger, loss, or harm”.
From a young age, we are taught to not make mistakes and avoid failure as much as possible. However, we are often taught from a similar age that from failure we should learn a lesson. To extract a lesson from failure we need to overcome the natural risk aversion which is much easier said than done.
Human brains are hardwired to react with fear when facing uncertainty or risk. This made perfect sense years ago when as cavemen our survival depended on being overly cautious. However, in today’s business world uncertainty is the norm and we often have to make decisions with very little supporting information.
Emotional intelligence (EQ) is a key characteristic in successfully taking risks and making decisions without overreacting and reverting to the “fight or flight” mode. EQ can be loosely defined as being able to recognise emotions and feelings in yourself and others and use this information effectively. Most successful leaders have a high EQ and in their companies, they would most likely have created an environment where employees are comfortable in taking calculated risks. There need to be defined parameters, but within these boundaries, employees should have the freedom to experiment with educated risk-taking. We need to take risks and make mistakes as long as they are new mistakes thereby maximising the lessons we learn – all we need are one or two successes for the risk to pay off.
Understanding what type of risk taker you are is key to knowing how far from your norm you are willing to move. Classifying risk-taking is not as straightforward as you may think – a risk-seeking individual could be described as an adrenalin junkie thrill-seeking adventurer or a courageous journalist or photographer in a high-risk war zone. One needs to satisfy an impulsive urge and the other is chasing the truth to improve the plight of mankind yet both are high-risk takers.
The following are a few ideas that successful risk takers use to avoid emotional responses and be able to make decisions in uncertain environments:
• You cannot control everything. Welcome the fact that not everything can be controlled otherwise you may lead a life of frustration and perceived failure. Accept what you do not know and act on what you do know.
• Make many small bets. Prepare for multiple scenario outcomes rather than betting everything on one idea. Develop a number of iterations based on small and diverse test groups – this also leads to the added benefit of having many contingency plans.
• Think rationally. Recognise when fear starts to impede your decision making and focus on the logical steps required to make the decision. It may be a cliché but finding that “happy place” in your mind can refocus you to positive thoughts.
• Be curious. Learn a little bit from many sources whether it be people or experiences, successes or failures. Our brains actually release dopamine, the feel-good hormone when we discover new things.
• Trust your gut. Over time intuition has fallen by the wayside as we are no longer faced with life and death survival situations. Intuition is shaped from our past events and experiences so we should learn to take advantage of our own inbuilt data analysis and listen more.