Project management practices, organizational management, and financial management include the concept of risk management.
In theory, according to project managers and directors of organizations, if you plan the risk well, everything will be fine. Reference: “Project Risk management – identification and analysis“, https://www.kosovatimes.net/project-risk-management-identification-and-analysis/
Let us share with you the story of Bipul Sinha, Co-Founder, and CEO of CEO Rubrik.
A calculated risk? No such thing
I grew up in a very small town in India, in a house without running water or a bathroom. When I was a teenager, I was a poor student. For me, the safest approach was to graduate from high school with mediocre grades and start working immediately after graduation.
Instead, my father gave advice that seemed crazy at first. He advised me to forget about marks and devote all my time and attention to preparing for the entrance exam that opens the doors to the best universities in India.
You could say that by choosing this path I put my future on the line. In the end, however, this risk paid off. After many trials and tribulations, including initial rejections from public universities in the country, a letter arrived from the Indian Institute of Technology (IIT), the country’s most competitive and prestigious college system.
One can take some obvious lessons from my experience, such as the importance of dreaming big, being persistent, and listening to a father’s wisdom. But the path my father and I chose plays a key role in the way I view an increasingly business-critical topic: risk. Reference (BVOP): “Project risk management“, https://bvop.org/learn/pmriskmanagement/
Striving to pass the university entrance exam despite my apparent lack of academic potential was a personal risk (one that other people in our town found confusing), but it wasn’t much different from the big bets people in the business world take. they do it every day. Risk and trading have always been inextricably linked. After all, almost anything that brings a return—on investment, starting a company, launching a new product—represents some risk.
Experts often tell us that the best kind of risk is calculated risk. We are told that smart entrepreneurs can process information and determine the likelihood of success or failure before deciding whether the risk is worth taking. Read more: “What is Project Risk Management“, https://www.policymatters.net/what-is-project-risk-management/
Was my unorthodox course of action in high school a calculated risk?
I do not think. It was more of a bold attempt to achieve an impressive result when I had nothing to lose. I had to take a transformational risk to change my future.
I am not a fan of calculated risk – neither the term itself nor its practical use. To me, this is the half measure that prevents a person from realizing their full potential.
“Calculated risk” also sounds like an oxymoron.
If a risk can be calculated in some way, then it is not a risk. Risk is inherently uncertain, which makes it extremely difficult, if not impossible, to estimate. This is especially true for startups where there are too many variables.
Second, if the risk could be calculated, people would not take risks. Why would any sane person start a company when 9 out of 10 fail? Why would I want admission to an IIT when the acceptance rate is less than 2%?
Given the above, how should leaders approach risk?
The first step should be to maximize risk, not avoid it. To create growth in a start-up, for example, the first years of the company’s existence must be filled with great risks. And yes, this is true even in times of economic uncertainty. In fact, given the number of leading companies created during economic downturns (Microsoft, Disney, FedEx, Uber, etc.), perhaps this is especially true during such periods. More on the topic: “Risk management plan and analysis: a real example“, https://www.businesspad.org/risk-management-plan-analysis-example/
The business of a startup is creating something from nothing. He, like me years ago, has nothing to lose. Disrupting the market status quo cannot happen without a passion for taking risks.
When talking about new business ventures, the question around risk should not be what and how much, but why.
This was our philosophy in the early days of the creation of the now-unicorn startup Rubrik. We decided to commit 10% of the capital we raised in each funding round to the highest level of risk we could bear. For example, when we only had $10 million in capital and our product wasn’t even in beta, we spent $1 million on marketing.
With the idea that our product would be on the market in a year, we reserved booths at various global forums and created marketing materials for a product that wasn’t even in alpha. We hired a sales team to create demand for the product. In other words, we invested before we had a product to create growth and momentum. The growth assured seemed to be worth the cost and risk. If we had asked too many questions and analyzed the risks, we might never have taken them!
The second step is to gain a deeper understanding of the risk factors that create barriers to growth and work tirelessly to remove them. Everything the company does from this point forward must be aimed at reducing friction and achieving the big growth goals. Even more risk management: “Methodology for risk assessment and project risk management“, https://www.mmrls.org/methodology-for-risk-assessment-and-project-risk-management/
Yes, the risk will shift as the company grows. At some point, the organization may grow large enough that it needs to change its thinking to protect the assets it has created. Then she will not be able to continue taking risks in the same ratio. After all, risks should never be reckless.
But while calculated risk suggests that risk is something that needs to be quantified and mitigated, it should be seen as something that needs to be understood so that the factors behind it can be mitigated. Risk is not really about the risk itself, but about the ability to live with uncertainty and ambiguity while relentlessly shaping a better future.
As an entrepreneur, I know that if I get up every morning and feel the same emotions, I’m doing something wrong. Running a startup means that some days I have to feel like I’m flying and others I have to feel like I’m dying.
Instead of seeing risk as something that can be calculated and isolated, think of it differently – as a group of factors that may need to be addressed but should never become their reality and get in the way of the achievement of high goals.
It is worth remembering that the word risk comes from the Old Italian risicare, meaning “to dare”. Entrepreneurs and visionary leaders dare. They don’t calculate risk, they accept it.
