Risky Business: Why Risks of Long-Term Rewards Should Never Trump Short-Term Security

August 23, 2016 in BUSINESS

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I spoke with the president of a major international engineering company recently and he said that his job depends on a 10% increase in profits every year.

He said it was a shame though because if there wasn’t this pressure to grow, that money could be better spent internally – helping bring in new blood to the workspace and taking more innovative risks. From small offices to fortune 500 companies, this is a common practice. Each new year must be a “success”, otherwise the business is not considered a good one.

But what if we change the meaning of the word “success”? Instead of making it synonymous with profits, perhaps it should be another way of showing achievements over adversity. This sentiment doesn’t come without a logical basis. Risks can be a way of testing new challenges in business and preparing for them should they come without warning. At the end of the year, to prove success the president should be able to display a set of risks taken and discuss them in terms of “what we learned” and “how this can help us in the future”.

Yes, these risks will involve using company profits, but regardless of whether those profits return, the risk must yield some valuable lesson.

Richard Branson, CEO of Virgin, wrote the following about the necessity of business risks in a 2013 article for Entrepreneur:

“One of the great benefits of taking on challenges in your working life is that you and your team learn to confront risk together – and also to lose sometimes, because when you make a good wager, the odds are not going to be in your favor…You need to hone these skills, because you and your team are going to face adversity at some point. No matter what industry you work in, the nature of business is change, and so while you can prepare for every possibility, some new, unexpected circumstance is likely to thwart you.”

Branson goes on to define risks not as whimsy, but as calculated business decisions. This should be rather obvious, but still it’s something that any CEO needs to be reminded of from time to time – especially when the company is thriving.

It won’t matter if you had a 10% growth or a 50% growth if you’re like Blockbuster Video and the entire way media is consumed radically changes. These are the types of challenges that can come without warning. Calculated risks can help educate your company on how to prepare – even if there’s no monetary ROI.

This year, consider how your business is spending its time and money. What will you be doing to better yourself and the company? Are there new ideas circulating? Are you listening to the ones involving radical change? Or are you planning on doing exactly the same thing you did last year?

A 10% increase in profits may seem like a great year, but it can’t compare to a 5% increase coupled with a new avenue of exploration. A business is inherently founded on risk – it would be wise not to sacrifice it for short-term security.

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