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Risk Management

Taking Smart Risks

How skilled are you at taking the right risks for the right reasons? By understanding the five types of risk and being realistic about your fears, you can maximise sales opportunities, minimise risk and develop the ability to confidently take calculated risks to achieve your goals.

Brian Tracy




All of life is a risk of some kind. Whenever you engage in any action where the outcome is uncertain, for any reason, you are taking a risk. You take a small risk when you drive to work or walk across the street. You take a larger risk when you start a business or invest a sum of money. You take a risk whenever you venture into the unknown, where your possibilities and probabilities cannot be determined to an exact degree. From the time you get up in the morning until you go to bed at night, and even when you are sleeping, you are facing risk to some degree. The issue, then, is not whether or not you take risks.

The issue is how skilful you are and, therefore, how confident you are in taking the right risks for the right reasons in pursuit of the right goals or objectives. It’s a fact that every great leap forward in human life begins with a giant step of faith into the unknown. Men and women who accomplish wonderful things are invariably men and women of great faith and confidence in themselves and their abilities. The better you become at analysing and assessing risk, and then avoiding as much of the risk as possible, the more competent and capable you will become, and the more successful you will be.

Types of Risk

There are basically five types of risk for you to consider:

1. Risk that is not yours to take
The first type is the simplest. It’s the risk that’s not yours to take. It’s the decision you do not have to make or the gamble you do not have to engage in. Every action has a consequence and often creates the need for further action, either to follow up or to remedy what happened. Whenever you can delegate an act entailing uncertainty, you can reduce your risk of losing time and money, and increase your likelihood of long-term success.

2. Risk that is unnecessary
The second type of risk is the risk that’s unnecessary. You engage in an unnecessary risk when you act precipitously, without sufficient information or taking time to think things through. Peter Drucker said, “Action without thinking is the cause of every failure.” Many of the mistakes you’ve made occurred because you acted without thinking – that is, you acted without taking time to minimise the risks involved.

3. Risk you can afford to take
The third type of risk is the risk you can afford to take. Calling on a new prospect, following up on a lead and exploring a new opportunity are all risks you can afford to take. In these cases, the cost of failure is very low, while the rewards of success can be very great. Buying an inexpensive product or service, trying a new restaurant and going out with a new person are all risks entailing uncertainty that you can afford to take because the downside is limited. The worst that could happen is that your ego might be bruised.

4. Risk you cannot afford to take
The fourth type of risk is the risk you cannot afford to take. The consequences of making a mistake would be too enormous. You cannot afford to bet your whole company or bankroll on speculation of any kind. You cannot afford to commit all your resources to a single project and have your entire success or failure hinge on the outcome of that project.

Many salespeople make the mistake of working on one very large prospect and gradually curtailing their efforts to develop a series of smaller prospects. From everything I’ve heard and seen, whenever a salesperson does that, the large prospect always fails to materialise, and the salesperson is left with empty hands and an empty pocketbook. People in the world of investing talk about the importance of spreading one’s risk. No individual and no company should be dependent upon one or two people for its financial wellbeing. One of the best ways to minimise risk is to develop alternatives to what you are currently doing. The more alternatives you have, the lower your risk and the higher your likelihood of success.

5. Risk you cannot afford not to take
The fifth type of risk is the risk that you can’t afford not to take. The downside may be costly, but the upside is so exciting that it’s worth taking a chance to go after it. If you are working on a big prospect whose headquarters is a long way from your main office, it’s certainly a risk to travel all the way there and back several times, but it’s a risk you can’t afford not to take. If the prospect materialises, it can make a major difference to both you and your company.

Know what can go wrong

Sometimes you will be given a job opportunity you can’t afford not to take. Although there is always a potential loss involved, the upside may be tremendous. One of the best exercises, in every situation involving uncertainty, is to assess and evaluate the worst possible outcome. Ask yourself, “What could possibly go wrong in this situation?”

Remember Murphy’s Law: “Whatever can go wrong, will go wrong.” There are several secondary laws to Murphy’s Law, such as: “Whatever can go wrong, will go wrong, and at the worst possible time” and “Of all the things that can go wrong, the most expensive thing will go wrong at the worst possible time.” Another sub law is: “Everything takes longer than your best calculation.” In advising businesspeople, I suggest that they take their very best estimate of breakeven for any business venture and then triple it to arrive at a more realistic number. Whenever business people follow this advice, they are amazed to find that, in spite of their best initial calculations, it does take about three times longer than they thought it would to start making money.

Another sub law is: “Everything costs more than you can possibly anticipate in advance.” In minimising risk in any venture, always add a ‘fudge factor’ to account for the uncertainty. Whenever I do a business plan, I always add 20% to the total of all costs I can identify, to come up with the probable cost. Anything less than this, whether in business or your personal life, is likely to be an exercise in self-delusion. Once you have identified the worst possible things that could go wrong, make a list of everything you could do to offset these negative factors. Engage in what is called ‘crisis anticipation.’ Look into the future, and imagine every possible crisis that could arise as a result of changing external circumstances.

Be pragmatic and question assumptions

Men and women who have achieved a high level of success are intensely realistic. They do not put their trust in luck. They carefully calculate every possible risk and then think about what they would do should it occur. They always have a backup plan in case things do not go as they wish them to. They have a ‘Plan B’ and options to that plan that take all kinds of variables into consideration.

Successful individuals engage in strategic thinking. They minimise risk by continually questioning their assumptions and asking themselves what they would do in the case of unanticipated delays, cost overruns or unexpected actions by their competitors. They are seldom caught unprepared because they have thought through the kind of uncertainties that create unacceptable risks – risks they cannot afford to take. In dealing with risk, a mild degree of fear or anticipation is often helpful because it keeps you alert and aware of what might go wrong. The problem with fear is that most people have it to an excess and are, therefore, paralysed by their fears rather than motivated by their opportunities.

There is an old saying: “Faint heart ne’er won fair maid.” And there is another: “Nothing ventured, nothing gained.” Giving in to fear makes you fearful, while acting boldly makes you courageous. Your actions create your beliefs, and your beliefs create your realities. Each time you feel afraid or nervous for any reason, the only solution is, “Do the thing you fear.” An old man once advised his grandson with these wonderful words: “Act boldly, and unseen forces will come to your aid.” Truer words were never spoken. Most salespeople are selling far less and earning far less than they are capable of because they have an exaggerated fear of rejection. Even though they have never met the prospective client or customer, they have an inordinate fear of that person and worry whether that person will like or approve of them. When you actually dissect the fear of rejection by prospects or strangers, it seems kind of silly. But for salespeople faced with the need to develop new prospects, it can – and often does – paralyse and hold them back.

Turn fears into challenges

One of the very best ways to develop your ability to take intelligent risks is to consciously and deliberately do the things you fear, one step at a time. You don’t have to leap out of an airplane without a parachute. That is not risk taking. That is simply being foolish. What you do have to do is resist your natural tendency to slip into a comfort zone of complacency and low performance. Take any fear you may be experiencing and treat it as a challenge and an opportunity to grow and become a better person. Face the fear, control the fear, master the fear – and continue to move forward regardless of the fear. This is the mark of the superior person.

Many of our fears of taking risks are unfounded. They have no basis in reality. When you test them, you find that they don’t even exist.
Often we are afraid to take the risk of approaching a stranger because we fear this person will not like us, be interested in us or be impressed enough to want to have anything to do with us. However, the simple solution is to get out of yourself and focus all of your attention on the other individual.

When you concentrate your attention on the other person and find reasons to like him or her, to be interested in him or her, or to be impressed by him or her, a remarkable thing happens: the other person, in turn, finds you likable, interesting and impressive. The secret is to ask questions about the other person and then listen attentively to the answers. Men and women who are popular with others practice this all the time. They eventually find that they have nothing to fear in introducing themselves to people, either on a personal or on a business level.

If you are in sales and you are thoroughly conversant with the benefits that your product or service can bring to people, you can approach them with calmness and confidence, seeing yourself as a helper rather than a salesperson. The very best salespeople, in all fields, see themselves as friends and advisers to their customers and prospective clients. They feel they are in a position to do a favour for a person who can benefit from what they have to offer. Instead of seeing risks in approaching someone they haven’t met, they see opportunities and possibilities. Their attitudes are positive and expectant rather than negative and reluctant. They overcome the fear of rejection by thinking and talking about ways in which their product or service can help the other person and enrich the other person’s life or work.

A good way to overcome the fear of risk taking is to set clear, written, measurable goals for yourself, and then to review those goals regularly. When you have clear goals and plans, and you continually work on them and evaluate your progress each day, you will see what you’re doing right and how you could improve your performance. You’ll feel more competent, capable and better about yourself. You’ll become more thoughtful and reflective and willing to take on even greater challenges. You’ll feel like the “master of your fate and the captain of your soul.” And your fears of taking risks will become smaller and smaller.

The Greek philosopher Aristotle said that all virtues are located on what he called the ‘golden mean’ between two vices. The virtue of courage, or the willingness to take risks, is located between these two vices: cowardice on one end and impetuousness on the other. Your job is to straddle this golden mean and strike a happy balance between acting impetuously and not acting at all, allowing fear to govern your emotions and actions.

You learn how to take intelligent risks without fear by taking intelligent risks and then analysing what happened. When you have clearly identified the risk involved, you can plan and prepare to maximise your opportunities while minimising those risks. The more positive you feel about yourself, the more effective you will be in everything you undertake. Your ability to confidently take calculated risks in the direction of your goals will ultimately lead you toward success.

Brian Tracy is the most-listened-to audio author on personal and business success in the world. His talks and seminars on leadership, sales, managerial effectiveness and business strategy provide people with proven ideas and strategies that they can implement immediately for improved results.


Risk Management

Are You Focusing Too Much On The Little Details (And Forgetting The Bigger Picture)?

To what degree do outside influences impact your business’s success? As a business owner, should you be focused on your business, or taking a macro view of the world?

Nicholas Haralambous




Entrepreneurs live in the daily grind of their businesses. This is unavoidable but can often be fatal. Day to day we think that the little things matter more than the very big things do. A little thing like the floor of your office or store being mopped daily can become a huge issue if not done.

Sure, these things are important because they create a culture of care and pride, but what you might be missing while you watch your team mop the floors is the macro-economic climate shifts that happen more rapidly than you think.

Step back to move forward

Early in the life of a new business the only way to survive is for the founders to do absolutely everything. From designing a logo and launching a strategy all the way through to writing tweets and emailing customers when there are issues.

This makes sense when you’re building a business, your team is small and your cash is tight. However, as you grow, it becomes important to let your people do their best and take on the day to day work.

Related: Expanding At The Speed Of Stress

As an obsessive entrepreneur it’s often hard to let go of these little details. Day to day operations will always be integral to the growth of your business and an important part of someone’s job in your organisation. However, it shouldn’t be yours if you are taking care of the big picture.

As the leader of your business you need to take a step back from the grind and look at the world around you.

To truly understand the positioning of your growing business you need to understand your country, continent and world.

You should understand the economic position you’re in as well as that of your province, country and even the markets that might directly influence your sales. Get a good understanding of the political stability of your country and the world.

Finally, you should figure out if there are any large- scale impending disasters. If disaster is imminent, like Zuma pillaging a nation and tanking an economy, then you have to get your head out of the floor mopping and into the high-level strategy of survival and preparation for disaster.

Move the needle


Every day there are 24 hours that you can fill. You can choose to work during that time and faff with the things that were once important, or you can figure out what is going to move the needle in your business.

What is going to really help you survive and grow in the years to come? Founders, CEOs and leaders need to be thinking about the next three, five and ten years. Let your team worry about today. Let the smart people you work with make today and tomorrow and next week work.

Chances are, the things you are doing in the hours/minutes aren’t saving your business or moving the needle. It’s the things that you plan for the next six months that affect the next five years.

Related: 8 Rules To Build Wealth When You Weren’t Born Into Money

Don’t live in a bubble

It’s easy to fall into the trap of thinking that you live in an isolated country or region that isn’t affected by world events. Unfortunately, no matter how hard you close your eyes and hide your head under the pillow you can’t avoid the fact that your business exists in a globally connected environment.

At Nic Harry we were affected by the Brexit events that unfolded in the UK and Europe. British shoppers were scared and didn’t spend their money when they were on holiday in Cape Town over the peak holiday season. I was so busy preparing for the seasonal uptick that I missed the link between a huge global event and my sales.

You live in a world that is filled with online shoppers and tourists who visit your business whether you know it or not. Prepare for the world to start having an effect on your business more and more.

Broaden your view

I am always fascinated by the narrow view of the world many entrepreneurs display. I may sell men’s socks, accessories and style but that doesn’t mean that the mining sector doesn’t affect my business.

Related: How To Plan, Prioritise And Get It Done Now

Even if you were an entrepreneur building a business in Antarctica I would urge you to read about oil prices, political world events and the intricacies of overfishing in the South American seas. Being well rounded and having a broad view of the world and your business can only make you a more robust thinker who sees more angles to exploit, protect against and thrive on.

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Risk Management

Why Adversity Is Actually The Best Thing For Your Business

There’s been a lot of talk about privilege lately: What is it? Who has it? Who doesn’t have it? I have a slightly different take on privilege and prefer to frame it as the privilege of adversity.

Allon Raiz




Studies across the globe show that the minorities in all contexts have higher rates of entrepreneurial activity than the incumbent majority. There are a host of reasons for this, but one of them is that adversity creates resilience and self-reliance that are vital for entrepreneurial success.

Every successful and exponentially successful entrepreneur that I have met or read about has transitioned through a baptism of fire. They have overcome insurmountable obstacles and used the lessons gifted through their experiences to rocket their business to the next level.

Related: Approach Adversity Head-On

The Five Gifts Of Adversity

A sense of where your true limits are. These are always far beyond what your belief system believed them to be. The experience of testing your limits breaks the preconceived notion of where your limits are or were.

Confidence. Once you have overcome an issue, the experience of overcoming it builds a high level of confidence that should the issue reoccur, you will have the ability and resources to overcome it. For example, if you lose your biggest client and manage to keep your business afloat, the next time you lose a big client you will not panic or become despondent, but will instead kick into action and claw your way out again.

Insight. Insight as to which of your non-financial resources you can tap into. When the chips are down and money is nowhere to be found, it’s amazing how many resources you will now perceive around you that can potentially help you transition to success. These resources come in the form of advice from friends, access to new markets through networks, credit from suppliers, and free promotion through networks, to name a few.

Your relationship with your own resourcefulness. The experience of not having resources but somehow manufacturing some out of thin air, recalibrates your sense of your own resourcefulness, which in turn builds a level of confidence that should you be dropped off in the middle of the desert with only a matchbox and a magnifying glass, you will survive.

Related: Learn to Adapt In The Face of Adversity

Faith. A level of faith and a belief system that there is always a way to overcome a problem. This is true no matter how overwhelming the problem may be. The more you overcome impossible problems, the less you’ll believe in the existence of impossible problems.

So instead of worrying about who has privilege, who doesn’t, or what privilege actually is, use the lessons gifted to you when overcoming insurmountable obstacles to propel your business forward.

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Risk Management

The Principles Of Cession: A Powerful Business Tool

Relinquish your rights with these quick and easy tips.

Nicolene Schoeman-Louw




In terms of South African law, the legal concept of cession was defined in Johnson v Incorporated General Insurance Ltd 1983 (1) SA 318 (A) and in FNB vLynn1996 (2) SA 339 (A), as:

“…an act of transfer to enable the transfer of the right to claim to take place.F Accomplished by means of an agreement of transfer entered into between the cedent and the cessionary and arising out of a justa causa, from which the intention of the cedent to transfer the right to claim appears or can be inferred and from which the intention of the cessionary to become the holder of the right appears or can be inferred.”

In simple terms, according to the online Oxford Dictionary, cession is ‘the formal giving up of rights, property, or territory by a state’. According to the online Free Dictionary, it is ‘the act of relinquishing one’s right’.

Related: BBBEE Employee Share Schemes – Should I Or Not?

This means that cession is clearly distinguishable from contracts because it does not create obligations and is also distinguished from delegation and subrogation, which do not involve the actual transfer of rights.

Valuable tool for business

Cession is a valuable business tool because it allows businesses to cede assets that can be ceded by transferring them − completely or not − when there is no cash available to secure a transaction or assure performance. However, it is essential that the parties involved understand and express their needs rather than blindly signing documents that do not enshrine their true intentions.

Legal requirements for a valid cession

According to van der Merwe et al 2002, the following requirements must be met to affect valid cession:

  1. A right inhering to the cedent
  2. Agreement between the cedent and the cessionary to give and accept transfer of the right
  3. Compliance with any formalities set by the law.

1.1. A right inhering to the cedent

Existing rights versus a spes

According to FNB v Lynn 1996 (2) SA 339 A, our courts have to date followed the approach that only existing rights may be ceded, and not rights which amount to nothing more than an expectation or spes. The determining factor in this approach is whether or not the right falls within the cedent’s estate at the time of the cession.

However, according to Muller v Trust Bank 1981 (2) SA 117 N, there is another theory that deviates completely from this approach and deserves a mention. In terms of the doctrine of cession in anticipando, cession of a spes may happen provided the cedent and cessionary conclude both a contract (obligatory agreement) as well as a transfer agreement to affect cession. Upon the materialisation of the right, when the right actually comes into existence, cession may take place.

There is no formal objection to this approach and our courts have not indicated that they are completely adverse to it. Nevertheless, there is no precedent to date that guarantees cession can be enforced based on this common law doctrine.

Personal right

Accordingly, any personal right may be ceded provided it already falls within the cedent’s estate and is capable, in law, of being ceded. Therefore, this even applies to rights that have not yet come into force or effect − such as vested rights (for example: the rights of the beneficiaries of a family trust before its dissolution); contingent rights (rights which are subject to a condition); and/or the right to receive your pension pay out upon reaching the age of 65 years.

Related: The Correlation Between Cash Flow Challenges And Risk

1.2 Justa causa (or intent)

A causa, or reason, for the cession taking place essentially determines the nature and extent to which the right is transferred between the cedent and the cessionary.

In the case of out and out cession, or normal cession, the right is usually transferred to the cessionary while the cedent has a reversionary right to cancel the cession and (re)claim the right, should it become necessary.

Whether or not total transfer of rights takes place in the case of security cession, or cession in securitatem debiti, has been widely debated for some time now. But, legal uncertainty prevails to a certain extent. The question remains as to whether security cession is only a ‘sue do’ or ‘theoretical cession’, where the cession is treated like a pledge of the right. In this case, no actual transfer of the right takes place.

The only logical explanation for this theory is that the cedent retains ownership but only relinquishes his ability to exercise or enforce his rights. Although the courts have, in fact, confirmed this construction may be theoretically unsound, some continue to apply this model based on the notion of an established legal precedent that has been applied for over 70 years. This was confirmed again in Grobler v Ootshuizen 2009 ZASCA 51, where the Supreme Court of Appeal held that security cession is nothing more than a pledge.

There is an opposing argument that this type of cession, regardless of the difference in causa, is treated as an out and out cession and transfer of rights. This theory is further supported by the case of Picardi Hotels v Thkweni Property 2008 ZASC 128, where the court held that a cedent who has not exercised his reversionary rights lacks locus standi in the enforcement or exercise of the right so ceded.

2. The agreement

Although an agreement for cession need not be in writing, a written agreement is always preferable. The only requirement set according to Botha v Fick 1995 (2) SA 720 (A) is that ‘mere consensus is sufficient to effect a cession’.

In addition, the cession must also be lawful and the rights of debtors should not be prejudiced. This does not imply that the debtor must be notified or that the debtor will become a party to the cession.


In most cases, there is no need to comply with any formalities to affect cession. In some instances, however, certain formalities are prescribed by law. In the case of a mortgage bond, for example: it must be registered at the Deeds Office.


Cession is a valuable tool in business. That said, it is of utmost importance that the cedent and cessionary both understand the legal nature and consequences of their transaction, or cession, before entering into an agreement.

What’s Next? How to Protect the Future of Your Business.

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