The importance of taking calculated risks in business
The word risk can often have negative connotations that stem from its definition: ‘a situation involving exposure to danger’.
From a young age, we are taught to stay within the confines of our means and be structured in what we do, whether that is saving money, getting a degree, getting a secure job, or having a long-term partner.
The reality is that everyone is different and what someone may perceive as taking a risk could be an everyday action for another individual. In business, without an element of risk there is simply no return. You must take risks to get ahead, but the key is always to ensure those risks are as calculated as possible and not irrational.
The Covid-19 pandemic has meant tightened budgets and scrutiny over all manner of decisions, so entrepreneurs and business owners must weigh up the consequences of their actions more than ever.
For many companies, calculated risks during a time of crisis can often be about ensuring there is no reputational damage to their long-term business, whether that is decisions relating to staff layoffs, pulling investments, or how they communicate with stakeholders.
A decade ago, I made the decision to move to the Philippines despite knowing nothing about the country and having travelled to Asia just a few times in my life previously. I firmly believe that life begins at the end of your comfort zone and having originally been based in a small town in Ayrshire, Scotland, there are few bigger shifts than to the bright lights of Manila.
I believe the single biggest issue that holds individuals and organisations back is fear. It’s a very powerful form of energy that comes at you like a headwind and pushes you back. A fear of failure is often a key factor in the prevention of growth in businesses and taking risks is often associated with opportunistic attempts to achieve quick success.
The reality is that everyone has that fear throughout their careers and regardless of what some may say, it’s not something that necessarily gets easier with age or experience. There are people that have worked in the same industry for several decades, but they don’t understand the need to harness that fear. I feel it every single day, but it motivates me to go forward and succeed.
In my pursuit of success, I’ve given up highly lucrative positions in organisations where I was a senior executive with potential to climb and advance my career.
But I always had a dream to be my own boss, to run my own successful business, and so I walked away and tried to establish my own company.
Circumstances beyond my control meant that my investors walked away and I was left pretty much penniless with everything I owned going to pay creditors and wondered if I had made a terrible mistake.
But I used that fear, that doubt, and the lessons I learnt, to help me recover to the point where a few years later I am now CEO of a major global company.
I’d recommend everyone to read the book ‘Principles’ by Ray Dalio, a businessman I really respect. I’ve heeded his advice on many occasions and believe that any person or organisation can adopt his principles to help them achieve their goals.
When taking a risk of any nature, it’s important to have a network of individuals that you can trust and confide in. I have built up several contacts over the years.
Having different people in different fields that have greater expertise is far more beneficial than limiting yourself to one or two close confidants. That said, it’s always important to be wary of any sensitive information that you are sharing with people outside of your organisation.
Almost every decision that I make will have some form of risk attached, whether that is an investment of time, money, or other resources, but, without careful calculation, you are risking the future of your business, and must always bear that in mind.
This article was contributed by Paul Fox, CEO, Mayfair International Holdings