Here’s Why Risk Is Something Your Business Should Embrace
Growing businesses succeed not by eliminating risk, but by understanding and managing it intelligently.
The following contribution is from Inc.com, the most prestigious SMB website in the United States, covering topics such as leadership, HR, business growth, NTs, and more.
The author is BRUCE ECKFELDT, CEO OF INC. 5000 AND STRATEGIC BUSINESS COACH. An architect by training, Bruce spent many years in digital product design and strategy before founding his Lean/Agile technology consultancy in 2003. He was named to the Inc. 5000 list for five consecutive years and ranked #241 in 2009. In 2014, Bruce founded Eckfeldt & Associates, where he works with founders/CEOs and management teams of high-growth companies, developing strategies and building leadership capacity. He is a speaker, author, and certified strategic business coach in Scaling Up and 3HAG/Metronomics. He is also a partner and lead facilitator at Wilder Retreats, which offers leaders unique experiences in natural and outdoor settings.
Most executives I know treat risk as a necessary evil: something to be minimized, avoided, or grudgingly embraced when pursuing growth opportunities.
However, this defensive mindset overlooks the true opportunity that risk represents for strategic leaders. In my years of working with companies navigating complex market transitions, I’ve seen the best leadership teams completely turn this conventional thinking on its head.
They don’t just tolerate risk, but actively seek out situations where their superior risk management capabilities give them the freedom to make decisions that leave the competition stagnant.
The companies that scale most dramatically aren’t necessarily the most confident; they’re the ones that have learned to turn uncertainty into a strategic weapon.
- Risk as an Opportunity
Smart leaders recognize that, in high-growth markets, risk represents both an opportunity and a threat.
While competitors hesitate or avoid uncertainty, companies with superior risk intelligence can boldly enter spaces others can’t or won’t enter.
The goal isn’t to eliminate risk, but to leverage it strategically: calculated risk-taking in areas of strength creates sustainable differentiation, while systematic risk management protects against threats that could stunt growth. This strategic approach requires a fundamental shift in how leadership teams approach uncertainty.
How We Manage Rather Than How We Avoid
Instead of asking «How do we avoid this risk?» the more appropriate question is «How do we manage this risk so effectively that it becomes a competitive advantage?»
Companies that master this mindset often find that their greatest growth opportunities lie precisely in the areas where competitors fear to venture.
- Apply a Systematic Risk Assessment
Effective risk management begins with thorough risk identification, rather than reactive responses to problems as they arise.
Most leadership teams address risks only when they become apparent, missing opportunities for proactive management and strategic leverage.
Implement a three-step risk assessment process for all strategic initiatives that go beyond traditional risk management approaches.
First, brainstorm and identify all potential risks that could impact execution.
Engage diverse perspectives to capture risks across market, operational, strategic, and financial dimensions. Go beyond the obvious risks to identify secondary effects and interconnected vulnerabilities.
Second, each identified risk should be assessed based on its likelihood of occurrence and potential impact on strategic objectives; a clear prioritization framework should then be created.
Consider the potential severity of each risk and how it might impact key stakeholders, resources, and timelines.
Third, for each significant risk, decide whether it should be avoided through alternative strategies and approaches or mitigated through specific plans that reduce its impact, such as insurance policies, contingency funds, or operational isolation strategies.
- Identify Strategic Risk Opportunities
The most sophisticated leadership teams go beyond risk mitigation to identify strategic opportunities where their risk management capabilities generate competitive advantages.
Rather than viewing all risks as threats to be avoided, they actively seek areas where superior risk intelligence enables bold strategic moves that competitors can’t or won’t attempt.
Develop a «Strategic Risk Map» that identifies risks your organization manages significantly better than competitors, and then design strategies that leverage these capabilities.
If your team excels at technology implementation risk management, you could implement digital transformation strategies that competitors avoid due to technical uncertainty.
If your financial risk management includes sophisticated scenario planning and stress testing, you could pursue aggressive expansion during economic uncertainty when competitors may shrink due to capital constraints.
If your operational risk management allows for rapid scaling without quality degradation, you could implement market share strategies that outperform competitors who can’t match your execution speed.
Create explicit documentation of your risk management strengths through systematic analysis.
Examine what types of uncertainty your team manages well, what risk categories it has successfully managed in the past, and where these capabilities could enable strategic moves that create market differentiation.
Look for patterns in your historical risk management successes: Do you excel at managing human, technological, market, or financial risks?
- Integrate risk intelligence into decision-making.
Risk management becomes effective when it is integrated into routine strategic decision-making processes, rather than treated as a standalone analytical exercise.
High-performing teams integrate risk analysis into their standard processes and frameworks, ensuring that risk intelligence enhances strategic agility rather than hinders it. Create «Risk-Based Decision Protocols» that require an explicit risk assessment for all strategic decisions that exceed defined thresholds, but structure these protocols to accelerate rather than slow decision-making.
Before approving new initiatives, strategic alliances, or significant resource commitments, teams should identify the main risks, assess their likelihood and impact, and define specific mitigation strategies.
However, the goal is not an exhaustive risk analysis, but rather rapid risk intelligence that enables confident action.
Establish standard risk questions for strategic discussions:
– What could go wrong with this approach?
– What early warning signs will indicate problems?
– What contingency plans do we have if the main strategies fail?
– What risks are we accepting and why?
Maintain a «Strategic Risk Dashboard» that monitors key risk indicators alongside traditional performance metrics, ensuring that risk information remains visible and actionable throughout implementation.
Strategic risk management is not about eliminating uncertainty, but rather about developing organizational capabilities that transform it into competitive advantage.
By systematically assessing risks, identifying strategic opportunities to exploit them, and integrating risk information into strategic decision-making, leadership teams can act more boldly and strategically than competitors, who see risk only as a threat to be managed.
Discussion Questions:
– What systematic blind spots might exist in our current approach to risk identification?
– Which of our risk management capabilities could become sources of competitive advantage?
– How effectively do we integrate risk assessment into our routine strategic decision-making processes?
From Threat to Opportunity
PwC’s 2023 Global Risks Survey
How a Technological Inflection Point Is Driving Reinvention, Resilience, and Growth
If we don’t take risks, we don’t progress.
Intelligent risk-taking is the only way organizations can reinvent and transform to survive, create value, and thrive in these uncertain times, while building resilience to protect value in the face of complex and ever-changing risk.
A Shift in Perspective
PwC’s 2023 Global Risks Survey reveals how leading organizations are shifting their perspective on risk by embracing the transformative power of technology and data to unlock opportunities and create value.
The study, which surveyed 3,910 business and risk leaders, from the board of directors to senior management, across technology, operations, finance, and risk and audit, also highlights how technology is playing an increasingly important role in helping organizations protect value by more effectively mitigating and managing downside risk.
The era of the benign risk environment is over for the foreseeable future, amplified by the increasing pace and impact of technological change.
These threats mean that intelligent risk-taking, driven by technology and framed by growth and opportunity, is now crucial to adapting and reinventing in this ever-changing world, both to protect and create value.
The transition to new energy sources is seen as the greatest opportunity among external disruptors, cited by 54% of respondents, closely followed by changes in customer demand and preferences (47%). In contrast, supply chain disruption is the top external factor perceived more as a risk than an opportunity, cited by 42% of respondents.
Industry sector also influences whether organizations fall at the extreme end of the risk tolerance scale, either protecting or creating value.
Those in higher-growth industries, such as retail and technology, are more likely to take risks and seek opportunities, while those in regulated industries, such as government and pharmaceuticals, are more likely to prioritize regulatory compliance and focus on risk prevention.
Different functions within the organization also have different perspectives on risk, with finance roles more likely than others to say their organization focuses on risk prevention rather than a high risk tolerance.
Moving Forward in the Pursuit of Opportunities
Interestingly, our survey reveals that the top 5% of performing organizations, spread across all industry sectors—identified in the research as Risk Pioneers—are moving forward in the pursuit of opportunities. Backed by strategic enterprise-level resilience and guided by a human-centered, technology-driven approach, these Pioneers are significantly more likely than other organizations to empower their internal teams and make greater use of advanced analytics, predictive modeling, cybersecurity tools, and the cloud to manage risk.
Additionally, they are more likely to view emerging technologies like GenAI as an opportunity rather than a risk.
As a result, this leading group is better aligning risk management with business strategy to achieve a wider range of outcomes and value, from stronger regulatory compliance and optimized reporting to increased customer trust and the identification of new business opportunities.
Five Key Findings
Our survey highlights five compelling findings for leaders. This report explores each of these in more depth, focusing on why they are important to organizations and their stakeholders, the value they create, and practical ways to use technology and data in new ways to address risk.
How to Use Business Risk to Take Advantage of New Growth Opportunities
The following contribution is from the Reworq Consulting portal, founded in 2015. Reworq Consulting is a management and advisory firm for SMEs based in Sydney, New South Wales, Australia.
Reworq Consulting focuses on providing services to small and medium-sized enterprises (SMEs) and organizations with less conventional business models.
The author is John Field, CEO and founder of Reworq Consulting.
Business risk is an integral part of business growth, as it allows organizations to pursue new opportunities. The higher the risk, the greater the potential reward.
Organizations face a variety of business risks, both predictable and unforeseen, that can threaten their ability to achieve their goals and objectives.
If these risks are not properly monitored and managed, they can seriously impact strategic plans and potentially reduce profitability opportunities.
By identifying and managing risks, businesses can achieve a balance between risk and reward, as each business model faces its own unique circumstances, objectives, and risk tolerance.
Risk, regardless of its form, affects an organization’s financial objectives and can lead to business failure.
Business risk is unavoidable,
but understanding and consistently assessing the likelihood of potential risks is critical to managing your risk portfolio.
However, understanding the benefits and types of challenges to anticipate in Risk Management can help resolve potential problems, as effective risk control and management becomes possible.
What is Business Risk?
Business risk is a component of Risk Management that assesses, prioritizes, and addresses the risks inherent in any change to an organization’s operations, systems, and processes.
Business risk guides decision-making and planning, enabling an integrated response to multiple risks and facilitating informed, risk-based decision-making. Business risk represents a broad set of circumstances or events that can negatively impact an organization’s financial and operational activities.
Risk management helps actively prevent business risks, but it is almost impossible to completely mitigate them.
Hence, the crucial importance of an organization’s ability to identify risks and have a Risk Management Plan.
The Impact of Risk: Business Risk vs. Financial Risk
Similarly, business risk is identified from both internal activities and external forces that impact an organization’s operational areas.
The immediate focus of organizations should be to identify the risk, avoid it (if possible), reduce it to an acceptable level, transfer it to further reduce the impact or share it, and retain it when conceptually agreed upon and accepted.
It is important to examine risk in the context of existing systems and processes, thereby developing an effective Risk Management Plan to counteract it.
Risk can be defined in two (2) main categories: financial risk and business risk.
- Financial Risk
Financial risk is determined by leverage and occurs when an organization relies heavily on debt as a source of financing.
When an organization’s management team must request surplus funds, they must pay both the principal and interest to meet their debt obligations. Liquidity management becomes an important concern, especially when future risk arises.
By using debt in your capital structure, your company becomes susceptible to rising interest rates, inflation, and the obligation to comply with the terms of its various existing credit agreements (suppliers).
Financial risk represents an organization’s commitment to meeting its debt service obligations, as well as potential regulatory and credit reporting requirements; however, these factors can lead the company to default.
- Business Risk
Business risk is determined by internal and external factors that converge to create threats to an organization and its executive management team.
These threats to an organization’s operational objectives can arise from the following:
The external business environment, including
