March 27, 2021

Two Factor Risk Mitigation

Let’s say that you’re considering doing something risky like - oh, I dunno - jumping a motorcycle over a pool with a shark in it.

The first thing you need to do is decide whether the upside is worth the downside.

So... you do a risk-reward analysis and decide that the eternal glory of success outweighs the certain death of total failure.

Okay. So far so good :-)

The next thing you’ll probably want to do is to mitigate the risk of failure.

In general, mitigate just means lessen, but I want to get more specific...

The are two factors you can use to mitigate the risk of jumping over a shark on a motorcycle:

  1. Decrease the likelihood of failure
  2. Decrease the impact of failure

An example of #1 would be taking shark jumping lessons so that you’re less likely to land in the pool.

An example of #2 would be wearing shark-proof body armor so that you’re less likely to be eaten if you DO land in the pool.

Here’s the thing...

There is no reward without risk.

You MUST take risks if you want to run a successful business.

If that stresses you out...

Decide which of your decisions have the most attractive risk-reward ratio, and then take steps to decrease the likelihood and impact of a failure.