Business risk – financial or emotional equation?

It has happened to me a few times over the past year. In one situation or another, I have placed an opportunity before a company, where they have been encouraged to spend a relatively small amount of money in order to ramp up sales or secure an investment. Eventually, the CEO has ducked out, often claiming that they could not see the added value.

On face value, that is fair enough. Putting it bluntly, the CEO asks: If I put in $1, will I get $2 back reasonably quickly and painlessly?

Today, risk models are all over the place. The Financial Times newspaper is sponsoring a series of events on the subject. Software is around in quantity for the small or large enterprise to help with the decision-making.

However, there is another element at play in these thought processes – the emotional layer. I have frequently written how some people are too afraid to make a decision. I have discussed the “what if” scenarios that get in the way of making a clearly defined decision. So many of us are expecting the worse for no logical reason.

A similar factor is a burning desire not “to let people down”. How many managers are so caught up and pegged down with former scenarios, where they perceive that they have failed others. Whether they have judged correctly or not what did actually happen, that perspective is hindering how they should proceed currently.

It seems that leaders who “pay attention to how others influence their emotional states” are also the ones who reject unnecessary risk, yet know when is the right time to accelerate beyond commonly accepted boundaries. We find these leaders are able to take responsibility for grim situations, and are willing to risk their status and comfort in order to stand behind bold, new ideas that will keep their companies flourishing.

With hindsight, could I have handled my potential clients differently? Maybe. On the other hand, I cannot research all the external influences in advance.

In parallel, for all their bravado as CEOs or senior management, it is interesting how relatively few people in business make a decision without understanding that their thought process is not always based on commercial factors alone. And this ignorance or lack of control is costing a lot of people a lot of money.

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One Comment on “Business risk – financial or emotional equation?”

  1. Michael Horesh Says:

    “Our emotions push us to make snap judgments that once were sensible—but may not be anymore.”
    Read fascinating commentary at http://www.psychologytoday.com/articles/200712/10-ways-we-get-the-odds-wrong


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