People are quick to respond to a risk by seeking to “manage or mitigate” it. They shudder at the thought of risk.
But there are times when the right thing is not only to take the identified risk (taking risk is a better way of looking at it than accepting risk) but to take more.
In fact, organizations only succeed by taking risk. They will fail if they try to manage or mitigate every risk.
There are some straightforward examples, such as:
The additional risk is justified by the potential for reward
Do you keep all your money under your mattress where the risk of loss is low? (It’s not zero because (a) it might be stolen, and (b) it will lose value over time.)
Few people do that. They take a risk.
They put the money in the bank and get some interest. They are willing to take the risk that the bank will fail.
Maybe they are persuaded to invest in more speculative assets such as stocks, bonds, or mutual funds. Maybe they invest in the family business.
They justify taking more risk by what they see as the almost certain higher level of reward. Hopefully, that is an informed and intelligent decision.
When I was a student at the London School of Economics, I would often play in a small stakes poker game. While it was ‘gambling’, I knew that only two people at the table (a friend and I) had any card sense…
