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Walid's Blog

There Are Risks And There Are Risks

In general, there are two types of business risks (and uncertainties) that not only you cannot eliminate from your business, but they actually determine the raison d’être of your business:

  1. Strategy Risk
  2. Execution Risk

I call these genuine Business Risks.

Almost every other risk in your business is unnecessary Bad Risks; e.g., bad book keeping, weak recruitment strategy, weak understanding of your market, low customer satisfaction, mispricing … etc.
Most businesses fail or struggle to grow due to the unnecessary Bad Risks! Ironically these risks are under your control. These risks can (and should) be almost eliminated

How to manage Strategy and Execution Risks?
The main reasons Business Risks cannot be eliminated is because they are impacted by external factors outside your direct control (new technology, competition, customer preference, economic environment … etc.).

For instance, you cannot control the entry of a very powerful competitor with top customer service (Strategy risk) but you can control your own customer experience through the quality of your product/service and adequate staff training.

You cannot fully control or predict, the reaction of your team to your new strategy (Execution risk) but you can minimise this by ensuring they are involved and engaged when your strategy was being designed.

In brief, minimising and managing Strategy & Execution Risks are done indirectly by controlling the factors that matter most.

How to manage Bad Risks?
By comparison, managing your Bad Risks is directly under your control. You can eliminate them by properly designed systems and processes

Executing a business strategy before getting your bad risks in check is like preparing to fly a plane without any safety checks. If you make it, it is no more than a lucky run of Russian roulette

Related Topics
Business Failure Can Be Optional

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