Written by 4:11 am Growth Mindset, Life English • One Comment

What is your Risk appetite?

When Risk and Reward are placed next to each other, almost 100% of us will prefer Reward and leave Risk aside. It is true, isn’t it?

The choice reflects that humans love to taste something sweet, but bitter!

However, have you ever found out the true definition of Risks and their classification? What are the Risks in life? How many types of Risks are there? Why do people prevent, run away from risks, and mitigate the risks?

Ultimately, what are they? Why do people often encourage you to take risks? Is it the best way to explore and exploit the potential you have?

Have you ever procrastinated anything that you want to do just because of the fear of Risks?

I have been hearing so many intriguing ideas from my friends, colleagues, and relatives. They usually start the conversation with me with the two keywords of ONE DAY…

         One day, I will run a business and be my own boss.

         One day, I will open a shop and sell fashionable and unique items.

         One day, I will write and share my knowledge with everyone.

         One day, I will read English books and try my best to be like you. 

         I will learn another foreign language like Chinese, Japanese, or Korean one day. 

“Excuse me!” – I muttered and then I often asked myself when one day would be.

According to the definition stated in a dictionary, “One Day” means “at some time in the future”. It might happen or not. There are no commitments in those sayings. How can your ideas come true without deep and firm commitments?

I often contemplated what they were saying when I got back home; I tried my best to decode the hidden insight beyond their words.

And here are the mysteries I solved by analyzing the words heard from individuals around me.

Normally, one’s desires come from what they miss, lack, and want in their lives. It is quite easy to understand the given contexts.  However, what I wonder is why their desires cannot help them defeat the obstacles and threats on the way to making their dreams come true. What else standing in the dark corner is trying to stop their desires from blooming and growing?

Obviously, “What else” in the aforementioned question is indicating the factors below:

  1. Understanding here is not ọnly about what you know solely related to what you are longing for; it is an integration between your desires, your resources, and your stressors.
  2. Commitment in the diagram refers to your attitudes toward the whole journey of activating your potential and getting things off the ground.

As usual, it is easier said than done!

And I bet that here below might be the serious questions that you want to address to me

1. How can I get that kind of integration in mind?

2. How can I build up proper attitudes toward the whole journey? What attitudes are they indeed?

3. What else can stop me even though I already possess the two big things mentioned above?

If you tend to ask me these questions or similar ones, congratulations! At least, you already started acknowledging your current situation or facing your main problem!

 

WHAT COMES ALONG WITH AN INDIVIDUAL’S DESIRE?

First of all, I would like you not to make yourself become a scientist and think about something too serious or academic. Make it easy for yourself when you try to see something from its core.

Do you agree with me that you normally imagine what you look like, how you feel, and how things and people surrounding you change when that day comes and your desired things come true?  For a short period, you happily immerse yourself in that magic moment and get fully inspired. Your battery seems to be incredibly fully recharged after a few seconds. Then, you tend to jump into making a “perfect” plan, sharing news with everyone, taking quick actions, and finally hoping that everything will go the way you expected. 90% of cases will fail and the initial inspiration cruelly vanishes in the air like water vapor; the darkness and emptiness inside you will be quickly filled with desperate and negative labels.

If that state happens so regularly in your life, it should be counted as a red alert because you are softly killing yourself with your strong desires done in a stupid method.

The better way to interpret it could be that Your Desire is just the starting point of all achievements you want. 

Desire never stands alone itself. It accompanies desire features, its doer’s resources, and stressors. Once doers are well aware of their desires in all aspects, they will be able to mitigate the hazard risks, control the uncertainty risks, and exploit the opportunity risks.

 

THE THREE TYPES OF RISKS YOU SHOULD KNOW

Risk, first of all, should be seen as the Effect of uncertainty on objectives. Note that an effect may be positive, negative, or a deviation from the expected. Also, risk is often described by an event, a change in circumstances, or a consequence. (ISO Guide 73 / ISO 31000)

There are many definitions of Risks you can find on the internet. Each version might reflect and indicate one aspect of risk. Also, risk can be classified in many ways. However, in this sharing, I will bring you three categories of risks including:

  • Hazard Risks (or pure risks)  are associated with certain events that may result in negative outcomes and cause a deviation from the expected.
  • Uncertainty Risks are associated with unknown and unexpected events. There is no precedent to refer to as well.
  • Opportunity Risks are associated with reward and return when one successfully conquers risks.

What can you learn from the definitions above?

When it comes to something new and desirable, the Opportunity Risks will appeal to you first because you can sense the rewards hidden behind them. They are the origin of your inspiration and motivation. They lead you to take action to get the intriguing rewards. If you just see the Opportunity Risks, your failure percentage is very high. It’s because you have no founded understanding to set a successful implementation in the long run. Remember that taking Opportunity Risks is a process, you are not supposed to rush to the destination. Take the steps one by one, slowly and wisely to reduce the negative impact and stay away from negative outcomes.

What is next?

Coming after Opportunity Risks, you are highly supposed to notice the Hazard Risks and Uncertainty Risks. They and the Opportunity Risks are triplets in a family. You cannot separate them from each other.

What to do with Uncertainty Risks?

Once you have your directions, please take time to visualize your steps in a flowchart, which is one of the 5 keys to risk recognition. From the flowchart, you can slowly and intentionally point out the strategies, tactics, operations, and compliances that you do not know or cannot deal with. They are closely linked to your resources and stressors at the moment.

If you are planning to do something in your business, please bear in mind the factors related to the macro environment (economic, political, legal, social, technological, demographic, and natural environments), the microenvironment (the bargaining power of customers, the bargaining power of suppliers, competitive rivalry, threat of substitution, and threat of new entry), and the internal environment (company culture and management style, marketing, finance, research and development, technological resources and info management system). 

If you are planning to do something in your personal life, please notice the factors like Family (background, culture & customs, successful case studies), Teachers (imposition, prejudice & biases), Friends (personal background, biases, and envy), Society (norms, rules, and trends).

Recognizing the operational rules will get you to go faster in this stage to be ready to board the ship of your new adventure called D-E-S-I-R-E.

What about Hazard Risks? 

Hazard Risks, also called Pure Risks, have no measurable benefits. And there are two possibilities: no loss at all or the likelihood of total loss.

The most common method of dealing with pure risks is to transfer them to an insurance company by purchasing an insurance policy. Pure risks are totally different or stand in direct contrast to Opportunity Risks, which investors make a conscious choice to participate in and can result in gain or loss.

When it comes to Pure Risks, there are some examples like uncontrollable forces (fire, tornados, hurricanes, lighting…), Identity theft, Accidents caused by another party…These risks are not controllable and are predicted in advance.

The best policy for Hazard Risks or Pure Risks is to transfer them to an insurance company!

Are you a Risk-taking or Risk-averse Investor?

After seeing all types of risks that may come with your desire, it’s time to make your decision: Take It or Leave It.

This process may take a few hours, a few days, a few weeks, a few months, a few years, or an entire life. Why?

To answer the question above, first of all, you should find out which type of investor you are: Risk-taking or Risk-averse.

Risk-Avoidance or Risk-Aversion

There is a defensive reaction to risk by exaggerating specific hazards because of the fear of being responsible for an adverse outcome. Also, a policy of risk avoidance is to create new risks which can reinforce people’s uncertainties and vulnerabilities. All of them can be easily explained with a long-standing tension.

Risk-Taking

When it comes to Risk-takers, it doesn’t mean that they are not afraid of  “loss” or they just think about “gain” only. The key behaviors of the risk-takers are :

  • Not to say “No” immediately
  • Consciously make decisions on Acceptable and Unacceptable Risks by identifying the risk categories and the sources, defining the affected agents (people, premises, processes, or products), and recognizing the possible impacts (finance, marketplace, infrastructure, reputation)
  • Predict and plan solutions to deal with risks if keep moving forward

Technically, if you find your behaviors falling into the first or the second group, you will understand more about actions and decisions daily.

By carefully, meticulously, and logically analyzing your risks along with your desires, you will help yourself better understand what you are doing or plan to do; and also test your endurance to form your commitment later. Normally, people have less or weak commitment because they lack a profound understanding of the things they are pursuing, especially, having no a comprehensive view of risks.

So what is your risk appetite?

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