Wide range of views are held on the best way of considering risk.
Amongst our Chamber members, I have discovered that there are widely held views on the ‘best’ or should that be the ‘preferred’ way of considering risk.
Talking about this with two members in different industries, we agreed that the same risk to one business owner that scores 10 on a scale of 10, could to another Managing Director, be as low as three out of 10. That’s a major discrepancy. It is probably driven in part by perception; plus the level of conservatism, namely aversion to risk, operating in that particular business. It does appear that risk can be affected by internalised, personal factors. To some, rock climbing is inherently a risky sport; to others climbing, with or without ropes, adds to thrill, with a risk quotient that is within the bounds of acceptability. The climbers consider it to be a ‘reasonable level’ bearing in mind what will be achieved by a successful climb. It is interesting by the way, that insurance companies class climbing as a high-risk sport.
Looking back, when I started my first business in electrical contracting, there was undoubtedly some risk. I remember channelling all my energies and determination into making it a success. In fact, I don’t recall having considered the level of risk. I was too focused and engaged each week in bringing in new clients.
When, I was later reminded by several bank managers that a high percentage of new start-ups fail in the first 12 months, it occurred to me that during those early months those start- ups may in fact have taken too many risks. Similarly, they may not have effectively considered the overall degree of risk, how to limit potential exposure to their business, and then stayed within those self-imposed boundaries. One wonders why having set parameters in place they moved outside them? There may have been unexpected opportunities to add to turnover and a failure to understand the consequences of becoming over stretched.
Bearing in mind that developing your business will involve some level of risk, it is thus preferable to work within boundaries of risk that are acceptable without exposing your business to failure. This is made harder when your business grows and you employ staff for whom you are responsible for providing work and their regular income.
One route that can sometimes lead to failure is engaging in diversification. I keep in mind that you are ‘an estimated 16 times more likely to fail, if you don’t stick to your knitting’, (meaning what you know and are familiar with); and sometimes having to disregard what look like other potential openings.
The Chamber membership now has businesses representing all sectors of industry; as well as ‘advisers’ whose portfolio careers offer broad, cross sector experience.
Many will be willing to share their advice and experience via the route of networking during Chamber events. The business hub in Staffordshire is a good starting point to gather advice on critical areas for your business. If risk is an important subject for you, then please make contact with the team. We have not yet finalised all the topics or speakers at Let’s Do Business at Uttoxeter Racecourse in June this year. Let us know via my email address below if you would like us to consider adding a workshop on risk to the list of topics to be presented.
I welcome feedback and comment on this column and the work and activities of the Chamber. You can contact me at [email protected]