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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

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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.

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How To Choose The Right Group Risk Cover For Your Business

Your clients and business partners are likely to be your main focus when you start out as an entrepreneur. But as your venture grows into a fully operative business of scale, your employees will matter just as much. That’s why it’s important to ensure you provide adequate employee benefits, and when it comes to group risk cover, it’s becoming increasingly important to find a solution that matches the needs of everyone in the business.

Schalk Malan

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It’s no secret that the world of work, as we know it, is changing. In a 2017 employee benefits study, US insurer MetLife found that 58% of employees surveyed “want customised benefit options based on their personal information”. And according to the same study, 73% of employees believe their employer is responsible for employees’ health and financial wellbeing. And in spite of this expectation, modern employees are unlikely to stay with the same employers for very long, because technology continues to create new opportunities.

It is within this context that it’s important for you, the business owner, to make your business as attractive as possible by offering your employees benefits that truly match their needs. Start by thinking of yourself as a custodian of their financial security. And in terms of group risk cover, the financial security not only lies in the cover itself, but in offering benefits that add real value to your employees’ financial planning – especially when you consider that it is your employees who are contributing towards their cover.

Why do you need group risk cover for your business?

Employers buy group risk cover for the people in the company to cover their future pay cheques in case something happens where they can’t work before they retire.

But this, unfortunately, is not the case with traditional group risk products, which typically offer blunt amounts of cover that is equal to, for example, three years of pay cheques for everyone in the company – irrespective of how many pay cheques they have left before retirement. As a result of this approach, younger people in the company have less cover compared to what they need, relative to their older colleagues who have fewer pay cheques left

Traditional group risk products also offer very little flexibility, leaving employees with little, or no option to buy more cover above what employers secured. They also don’t offer a choice between lump-sum or recurring payouts when members claim, or always secure the ability to take their cover with them, should they decide to leave the company.

Related: How BrightRock Is Rocking The (Industry) Boat In Only 5 Years Since Launch

So how will you know you’ve selected the right cover?

Start by asking your financial adviser to look out for a product that works out how many pay cheques each employee needs to cover, and then gives every person in the company the same level of cover in proportion to the amount of pay cheques left until retirement. By following this approach, your employees’ cover will provide more people in the company with much more cover. There already are forward-thinking group risk cover providers in the market that manage to offer up to 50% more cover by following this approach.

Secondly, ask your financial adviser if your employees will be able to buy more cover over and above what you secured. There are innovative products on the market that offer up to double the cover free of underwriting, which enables your employees to benefit from the insurability you’re providing them, and to close gaps in their insurance.

And – in the spirit of the modern world of work with a more mobile workforce – these innovative products enable employees to take the cover with them when they decide to leave your company.

It’s also important to ask your financial adviser if your employees will be able to choose between a lump sum and recurring pay-outs when they claim. Traditional group risk policies tend to expect employers to make one choice  between lump sum or recurring payouts on behalf of all of their employees when they take out the cover. Forward thinking cover providers have turned this approach on its head, offering employees the option to choose between recurring or lump sum payouts when they claim.

The importance of claims certaintly should never be understated, starting with obtaining a clear picture of the clinical conditions the group risk cover actually covers. There are new players in the market that provide extensive and transparent lists of clinical claims conditions for additional expense needs, covering more than 200 conditions.

And exactly how permanent does the insurer view a claim for a permanent condition? For example, if an employee is to be diagnosed with Stage 4 cancer, will he or she receive a 100% payout on diagnosis, without the prospect of ongoing reassessment? A needs-matched product offering would never require the reassessment of permanent expense needs claims.

In conclusion …

You wouldn’t expect your employees to work under dangerous conditions. So why would you select a group risk product that will not serve in their best interests when they need it most? That’s where needs-matched group risk cover comes to the rescue – not only for your employees, but also for your business by providing security and benefits offering real value in the modern world of work.

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Risk Management

How to Take Risks That Win (Almost) Every Time

Knowing which risks to take, and how to take them, can be extremely helpful in stacking the odds in your favour.

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Looking 13,000 feet down out of an airplane, parachute pack secured, your heart beating in your throat, must be one of the most terrifying experiences imaginable. Though not all risks are life-threatening, all risks are frightening. As humans, we’re constantly afraid of failure, of doing something wrong and of having to deal with the consequences. Yet, at the same time, there is nothing more rewarding than reaping the benefits of a risk gone right – of landing safely ground, to build the earlier metaphor.

For entrepreneurs, risk taking is a necessity of the job. After all, we’re never quite positive that things are going to work out the way we envision. We make choices daily which affect our business, and we can never be absolutely sure that we’re making the right ones.

Knowing which risks to take, and how to take them, can be extremely helpful in stacking the odds in your favour. While risks are unavoidable, approaching them strategically can be the best way to decrease your parachute’s chances of failing, so to speak, and to produce measurable results that you would never have achieved had you avoided the risk in the first place.

Related: Dream Big, Plan Well, Minimise Risks Says Braam Malherbe

In order to hone your risk-taking skills, here are some guidelines:

1. Information is your friend

The more knowledge you have about any given topic, the less risky your endeavours will ultimately be. For example, many of the most steadily successful brokers on Wall Street are those who understand the patterns of the market better than anyone else. While there are always going to be those people who make millions off a risky uninformed bet, they are the same people who most likely will lose all their earnings on a single trade. Traders who build a sustainable career for themselves are the ones that have deep knowledge of the industry.

Similarly, you should be an expert in your field. You should know your industry well – your product or service you are providing. You should understand the buying patterns of consumers, their motivation and pain points. What drives them to buy your products? Where and when do they buy? What makes them stop buying?

As an entrepreneur – or in any profession that requires risks, really – you’ll want to have as much information as possible. The more you know, the fewer unknowns there are. The unknowns, ultimately, are what makes an action risky.

2. Assess the risk carefully

While risk is a reality of life, there is also something to be said for strong assessment skills. Being able to look at a risky situation and decide whether or not it’s worth taking is a hallmark of a good businessperson.

Venture capital investors, for example, spend their entire careers deciding which companies are worth risking time and money on. Those who throw their money around recklessly, while admirable for their risk-taking, are not necessarily the most successful investors.

Being a good risk-taker involves using the information you have to assess a situation and decide whether or not the risk is worth it.

Related: 5 Infamous Risks Every Entrepreneur Must Face

3. Learn from failure

Appreciate that all risks are learning experiences. Especially those that don’t pan out.

On some accounts, failure is actually more valuable than success. While failures may not lead to an increase in your bottom line, you can use the opportunity to glean important information about what you’ve done wrong, where you misstepped and how you can move forward in the future.

The biggest mistake many people make is seeing failure as a measure of who they are, rather than a measure of where they can go. We’ve all heard that failure is feedback. Most successful entrepreneurs failed at many ventures before they created that million-dollar offering. Most overnight successes took many years to make. If you take a risk and fail, learn from it. Ask yourself what you can do differently next time, and then move on. The only failure is not learning the lesson that it provides and using it to hone your next endeavour.

According to Mark Zuckerberg, “The biggest risk is not taking any risk. In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks.”

Taking risks is the only way to go from here to there. Even failed risks move you closer to your goals if you can turn that failure into valuable learning and a plan for improve your results next time.

This article was originally posted here on Entrepreneur.com.

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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

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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

business-solution

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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