How to evaluate risks before taking them
Whether you want to create or expand your business, buy a new house, or simply become a bit more adventurous, there will be risks at every step of your life. Every choice you make will have consequences – which can sometimes be rather disastrous. It is therefore important to be able to evaluate risks before taking them to maximise positive outcomes.
The path to success
Without being totally reckless, life sometimes calls for throwing caution to the wind! Indeed, the path to success is full of risks. Taking chances makes you proactive, it helps you grow and open up to opportunities and new experiences. More importantly, taking risks makes you feel alive. It means that you realise the power you have over your own life and the things around you. As a child, if something was out of reach, you would try to get up somehow – get on your toes, or even climb onto whatever you could find to get what you wanted. As an adult, responsibilities keep most of us from taking chances and, if something seems too out of range, we sometimes choose not to climb up for fear of falling. But if you never try, you might miss out on many lovely experiences, happy moments and amazing achievements.
Classification of risks
From cautious to reckless, decisions all come with risks and potential rewards. All of which fall under one of the following categories – from low to high:
- A “low” risk is one you can easily afford to take because the cost of failure is little and the possible reward is high. It includes minor changes and decisions such as a new haircut, joining a new club, or simply trying out a new recipe. If it does not work out, you have not lost much.
- A “medium” risk might feel like one you cannot afford to take because, if you are wrong or make a mistake, the consequences will be significant. But the possible positive outcomes are so great that it might be worth trying! For example, taking evening classes after work because you want to change careers. It will mean investing money in a course and having less time for yourself and your family, but it could have a very positive impact on your career, your well-being and your life and future.
- A “high” risk is more dangerous. One you feel like you cannot take because the penalties could be terrible and costly. One example would be quitting your job because it makes you unhappy without any backup plan or savings while you have a family to care for. Not having a job or being able to cater for your family’s needs might make you even more unhappy.
Think about the positive versus the negative outcomes. Once this is done, you have a good inkling whether the risk you want to take is “calculated” or not.
Preparation is the key
A risk means exposure to danger, or to a negative outcome. It is therefore important to think about every destructive aspect of a decision and the potential consequences so that you can reduce them and/or be ready to face them. What do you want to achieve? What are you ready to give up on? Maybe there is another way to get a similar result without risking as much? If you have time to think and prepare, the risks might be lower. If it is a financial decision for example, you can take the time to save money and do your research.
You can talk to the people around you, use discussion websites, or read blogs to learn more about people who have taken similar chances. Ask them about the outcomes and how they have dealt with the issues that might have arisen.
Making important decisions and taking risks is always difficult, but great achievements come at a great price! Whatever your choice is, make sure you use good reasons and not excuses or fear to justify it. Looking at all sides will help you make rational, well-thought decisions and take calculated risks.
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