Strengthening Your Comfort with Risk Ability

Strengthening Your Comfort with Risk Ability

When you're comfortable with risk, you're able to take chances when appropriate, and you're not afraid to innovate and experiment with new ideas and new ways of doing things.

For example, you're holding down a well-paying job to put yourself through business school, and suddenly you get an idea for a new enterprise. You think the new venture could be very successful. But to give the enterprise its best shot at succeeding, you'd have to devote significant time to it – which could put your current job at risk if your employer starts questioning your commitment. However, if your new venture goes as well as you think it could, you'd start making decent money fairly quickly. After assessing the odds of your venture's success, you decide to try launching the company. You know you're taking a big chance, but you tell yourself that if things don't work out as planned, you'll figure out what to do next.

As this example suggests, comfort with risk is a key ability in all walks of life – whether you're starting a new business, making a commitment to a romantic partner, or buying a new home and then hoping you can sell your old one. If you weren't able to tolerate risk, you wouldn't be able to make important decisions and move your life forward.

To become more comfortable with risk, consider these suggestions:

• Read a book on the subject. Potential useful titles include Risk Intelligence: Learning to Manage What We Don't Know by David Apgar, The Fundamentals of Risk Measurement by Christopher Marrison, and Risk Management by Michel Crouhy et al.

• Take a self-paced online course on the subject. Examples include the "Managing for Creativity and Innovation" module in the Harvard ManageMentor series, developed by Harvard Business School publishing. Online courses often introduce key concepts related to the topic, provide hands-on practice in related skills, and offer helpful tips and tools. Your employer may have a site license to such courses that you can access through your company's intranet. You may also be able to purchase individual CDs containing modules of interest to you, or download them from the Web for free or for a small fee.

• Consult an expert. Find someone at school or at work who you view as particularly comfortable with risk. Ask this person how he or she has strengthened this ability.

• Attend a workshop, training session, or course on the subject. Your employer may offer some of these, or may be willing to fund your tuition if you take such a course. Your local adult education programs may also offer such courses and workshops.

• Understand the risk in not taking risks. Many people assume that taking a risk means doing something different. It doesn't: Continuing to do things the same way is also a risk – meaning that it has consequences you might not have intended or wanted. By understanding that doing something in the same way is still taking a risk, you get more comfortable with the realization that risk truly is a fact of life.

• Manage cognitive bias in risk assessment. For example, in assessing several risky courses of action, people often add up the risks associated with each possibility and then compare that total to the risk of maintaining the status quo. As a result, changing course looks a lot riskier than the status quo – though in reality it may not be. By understanding and avoiding this type of cognitive bias, you can increase your tolerance for risk.

• Avoid giving too much weight to catastrophic outcomes. In most people's minds, the more upsetting the potential outcome of a decision is, the higher the probability that that particular outcome will occur if you go ahead with the decision. For example, suppose you run a company and you're considering drastically changing your competitive strategy – a highly risky move that could put your firm out of business if it misfires. When you imagine your company failing and experience the despair that comes with this image, you become more convinced that the new strategy will likely misfire. You decide against making the change. But in actuality, how horrific a potential outcome would be has nothing to do with its probability of occurrence. When you fall victim to this cognitive bias, your assessment of risk becomes distorted, preventing you from making a reasoned decision. To avoid this bias in assessing a risk, take yourself out of the equation. Pretend that it isn't your company that you're putting at risk – it's a company. By viewing risks as applying to situations, not persons, you prevent your emotions from distorting your judgment.

• Analyze probability and quality of potential outcomes. Whenever you consider any risky outcome, ask yourself two questions: 1) What's the probability that this outcome will occur if I take this risk? 2) How bad or good is this potential outcome? It's best to steer clear of a risky outcome that has a very low probability of occurring but that also has really dire outcomes (e.g., someone could die if you pick the wrong course of action).

By growing more comfortable with risk, you enhance your ability to make reasoned decisions and accomplish important goals in all dimensions of your life.