Have you discovered how to use positive risk in your business yet?
Positive risks are also known as opportunities. Opportunities can strengthen and grow a business even through very difficult times, but just because they appear as a good opportunity does not mean that the outcome is guaranteed. For example:
- You may have worked hard on a tender application only to be unsuccessful.
- You may have invested money in opportunity A, but had to pass up opportunity B which could have been better.
- You may have launched a new niche product only to find a competitor launched one similar for a lower price.
Despite the risks, there are 3 ways you can use positive risk to stay competitive in tough times.
- Improve existing business assets.
- Adapt, innovate or create something new.
- Partner or collaborate on a bigger opportunity.
There are often small opportunities hiding in the background of our business, but something holds us back from acting upon them.
- It might be a skill you think you should be better at before you attempt this opportunity.
- It might be a lack of confidence or knowledge in how to get started.
- It might be that you don’t know where or how this opportunity could be beneficial.
Turning business weaknesses into business strengths is a simple strategy to make the most of a positive risk. For example, in 2020 many businesses became more comfortable with using the Zoom platform, although some resisted. Become familiar with new technology is an opportunity to rectify this weakness by exposing you to other options for marketing or engaging with your audience. Once you have this skill, you can use it in many different ways to enhance your business reach.
Another opportunity is to assess your under-used digital assets. During 2020, many businesses signed up to Vimeo, Zoom, YouTube and bought equipment to set up home video studios. Sales of ipads, touchscreens and other technology went through the roof. (Do you remember having to wait months for an ordered webcam or microphone?!).
If you invested into these assets, how many are you still using to generate income today? Why not audit the resources you have lying around your office or store and see which ones could be increasing income if they were repurposed, or used in another area of your business. As you already own them, the opportunity risk may be limited to the time you invest into their use (which could be used to do something else), rather than the risk of investing yet more money.
Opportunities for the next 3-6 Months
As business regains its momentum, now’s the perfect time to focus on opportunities that need a little more time and money. Often these come from new projects, new ideas or improvements on existing products.
Assess your idea objectively
It is a fact that confirmation bias tends to get in the way of our own ideas. This brain bias means that we tend to look for data that supports our existing beliefs, while rejecting information that goes against our beliefs. So we tend to ignore anything that doesn’t confirm this really is a great idea, which can lead to failed projects. Project management offers some great tools to combat confirmation bias – one being the project charter.
Use a project charter
The purpose of a 1-2 page project charter is to broadly define and discuss your opportunity, finding the flaws and risks early, before you invest signficant time and money.
Think about what it will take to get this opportunity off the ground and seek input from key stakeholders (your accountant, business manager and a few objective colleagues). If others can see problems with the idea, or the costs start to add up, or you realise you need it finished sooner than the time you have available, those are the issues to rectify before you move on.
For example, a project charter will ask:
- what is the purpose of the idea,
- who is the target audience
- what will be delivered to a customer at the end of it
- are there are any major positive or negative risks to consider? Especially anything that might cost substantial time or money.
- Estimate a rough budget to see if the idea will generate sufficient benefits to make it worthwhile.
- Estimate a rough timeframe to see if it’s achievable and break it into several key milestones.
A project charter helps you to see where your likely risks will be. Is the idea easily copied? Could the budget be exceeded? Will it take too long to generate a profit? Could it be outdated in a short time? These and many other risks are quickly identified when you take the time to plot your opportunity out first.
Make a wise choice
It’s wonderful when more than one opportunity comes along, but investing in both may be prohibitive.
A risk management process will help you assess where each opportunity may have the most impact in your business. For example, how one opportunity may add more to your bottom line, or increase your reputation, or increase whatever ‘value’ you decide is important should this opportunity succeed.
Because risk assessment is a subjective process, and confirmation bias again tends to influence it, it is best to do it with other people who will challenge your assumptions and beliefs. This means you get a wider set of opinions on the likely benefits and dis-benefits of each opportunity before you make a decision.
Consider negative risk
A strong opportunity risk process will also look at the negative risks that could happen by going ahead, and the opportunity cost for investing in one over the other. You may also consider whether business growth could stall or even go backwards if you didn’t take this positive risk?
Opportunities for the future
Confident entrepreneurs know that to act on a good opportunity means making well-informed decisions, and not hoping that ‘something magical just happens’!
Sharing the risk
As exciting as it is to launch a big project that carries higher risk for significant financial gain, you are probably sharing the risks with another business partner or group. This means you will need an open and transparent discussion between all parties about likely risks – both positive and negative.
Risks that are overlooked can be extremely costly at the entrepreneurial stage. In projects that face very high risks, the potential of losing the funds already put into the project or investment (‘sunk costs’) can unconsciously drive decision-making towards further risk-taking, even when it’s likely to increase the losses. So it’s critical to have a process that helps you to weigh up the risks as objectively as you can and make smart decisions at each step.
Risk works best with strategy
A risk assessment helps to protect your business assets and your investment. It identifies foreseeable problems and gives you a process to decide how to deal with them. But risk assessment can’t act alone. It must be underpinned by your own business strategy and regular, open communication between you and your team, business partners and other stakeholders. Without a joint effort, the risk is everyone assumes that ‘someone’ is identifying risks and planning for them when in fact, no one is.
Apply risk to funding opportunities
The skills that you develop as you practice risk and opportunity management are useful for tender applications, for any project and for insurance and quality assurance purposes. Consider if you might have lost out on grants, tenders or funding opportunities because your risk process was not clear or comprehensive enough?
If you’d like to learn more about risk and opportunity management in business, you can click here to discover my online on-demand course and ebook, or download a free chapter of the e-book by completing the request below. Contact me at email@example.com to see where you can improve your risk processes today!