Why reducing risk is central to a healthy business

risk reducing healthy business

If the recent economic downturn has thought us anything, it is that business is no place for a compulsive gambler. Sure, occasionally, every good business person needs to take a chance on a long shot that might not make it but, for too long, too many CEOs have been living by the SAS maxim of ‘He who dare wins', needlessly risking and, often-times, losing their business' well-beings in the process.

In reality, that motto should be ‘He who takes the time to measure each individual risk in a given situation and stacks them up collectively against the potential rewards to calculate an accurate risk-rewards ratio wins', though that probably isn't quite so catchy.

Of course, even a solid risk-reward ratio leaves something to chance – after all, nothing in life or business is ever certain. But if you can honestly appraise the real pros and cons of a business opportunity and then have the confidence to follow your appraisal, you are in pole position in your chosen field.

The key to this is information. Before you invest in an idea, a business or a new venture, learn as much as you possibly can about it. Take it apart from every angle and measure the possibilities in the realest possible terms. The romantic business person is the failed business person – base all your information on things that are measurable in the realest possible terms.

A good example of a good risk-reward ratio, is when an investor purchases a business out of receivership. In many ways, this is the ideal time to purchase a company. Before receivership, a buyer would also have to take the liabilities as well as the assets, whereas after receivership the buyer just gets the assets and the equipment necessary to keep the business running.

So, whether you are investing in a company or starting your own venture, take every pre-caution and investigate the situation as deeply as possible in order to keep the risk-reward ratio tilted in your favour. If you don't fancy doing all that, then save yourself some time – open an online blackjack account and hit the tables.