No Risk No Business

Like it or not, Chance and risk are at the heart of your business success and profit margins. This is not an invitation for putting your hands up and blaming it on the weather.  To the contrary, understanding how risk plays a key role in your venture can make the difference between landing safely in bad weather and not flying at all.

The key is to be aware that your understanding of chance must be at par with your understanding of business fundamentals.

Business fundamentals are what you read about in business books and discuss in MBA courses. They constitute the know-how of how to run and manage a business and what business structures look like and why.

For instance, every business needs a product or service, market awareness, sales, client base, delivery mechanism and cash-flow & profitability. Take any one of these away and you won’t have a business, but a hobby at best.

However the complexity of each of these business elements and the interaction between them is where risk plays its game, and where the best business minds focus their energy. Bill Gates was not a drop-out from Harvard; he deferred his university degree first, ‘just in case’.

To take this one step further, I argue there is not one bit of margin in your business profits that cannot be associated with a degree of risk you took or are taking with the business fundamentals. And if you happen to come across some ‘risk-free’ margin, you have either overlooked the risk, or you will soon see this margin disappearing and shared by your competitors.

You are in business because you are taking risk; not any risk but your core business risk. And the higher your core risk, the higher your business returns should be. Otherwise the risk is “none of your business”, so eliminate it or minimize it, or you risk being out of business.