Whether personally or professionally, the things that keep us up at night are uncertainties, such as “will I have enough money budget?” or “what will happen to my company if we are late on our intermittent and final deliverables? Or “what kind of impact will there be if my latest client is not happy with my work?” Of course, these concerns are valid but non-existent until they materialize. Still, it is the fear of these risks materializing that creates anxiety. So, one way to deal with this problem is to face it head-on and analyze these uncertainties one by one. Again, this exercise will work for either a personal or a professional situation.
The basic concept of risk management starts with identifying as many potential risks as possible, but note that risks can be either positive ones, known as “opportunities,” or negative ones, called “threats.” For example, when launching a business, a threat might be not finding enough clients for your product or service. At the same time, a potential new client might fill up your orders for months if your product satisfies their requirements and expectations, which would be an opportunity. You need to develop a plan to address each one in either case. In this example, you might mitigate it by having funds in a reserve account or not launching until you have a certain amount of orders you can count on. On the other hand, the opportunity would be addressed by providing excellent customer service so that this client will be a repeat customer.
Another impact of risk analysis consists of dissecting each risk concerning probability and effect, which work together but are entirely different parts of risk. For example, there might be a 30 or 40% chance (probability) of going bankrupt within the first year of launching your business. However, the impact would be extremely high such as a 9 or 10 on a scale of 1 to 10. Also, not finding the right staff might affect the 9 or 10 range, but the probability might be low, such as 10%. In both cases, you would still plan for these risks in detail but focus on the risks with both high impact and high probability. This approach applies to positive risks because the higher effect and higher probability ones will generate the greater benefits.
As I wrote above, this approach to risk analysis can be applied to any scenario. For example, you might want to analyze the risks involved in changing careers, going back to college, or relocating to another city or state. There will be risks involved in all cases that generate a new outcome. And it behooves you to identify them and demystify them by facing them head-on because not only will you have a plan of attack ready, should they come to the surface, but it will also give you a framework to address other unidentified uncertainties or changes. For example, few of us understood the magnitude of the recent pandemic, but for those of us who had identified everyday risks, such as key people calling in sick or quitting, or inability to travel due to various issues, the effects, and impacts of the pandemic were a little bit less intense.