Paul Raggio | Assess risk before deciding

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Like many of you, I love the game of golf. It’s a game that is wholly dependent upon your skill, course management and risk-reward pursuits. Club selection, wayward shots, obstacle misjudgments, faulty equipment and inclement weather often are excuses for poor performance. Nevertheless, the score you walk into the clubhouse with is owned by you, no one else, just you. 

A big part of the game is how you approach risk in your shot selection. At one end of the spectrum, you can choose to pursue every high-risk shot, and at the other end, you can choose to calculate the probability of achieving every high-risk shot and pursue only those you have confidence in making. The former causes chaos and instability, the latter order, and steadiness.  

A risk-reward hole is one that presents the golfer with clear strategic options. Among them is a risky option that provides a tangible reward like an eagle or birdie if pursued and achieved. An example of a risk-reward hole would be a makeable par 5 in two from the tee, but this direct route requires overcoming a hazard. There will be another route, which takes the hazard out of play, but will typically result in playing an extra shot. The risk-taker takes the direct route intent on overcoming the obstacle. The conservative player takes the indirect route, thus eliminating the obstacle from play. 

“Tin Cup,” a 1996 film with Kevin Costner, Don Johnson and Renee Russo, is about a washed-up, risk-taking and very erratic golfer, Roy McAvoy, played by Costner, making a run at the U.S. Open Championship. Johnson plays David Simms, a very conservative, calculating tour pro and McAvoy’s nemesis and top competition. Russo plays Molly Griswold, a sports psychologist and the love interest of both McAvoy and Simms. 

McAvoy can’t resist taking the high-risk, high-payoff shots, and seldom makes them, living out a very chaotic, roller-coaster golf career. He’s exciting to watch because you never know if he’s going to make that once-in-a-lifetime shot that captures the tourney title or go down in flames and do the walk of shame. On the other hand, Simms calculates the probability of his score on every hole, seldom succumbs to the temptation of the once-in-a-lifetime, high-risk shot, living out a very steady, lucrative golf career. 

Leading a company offers daily risk-reward decisions. You can lead like a McAvoy and pursue every high-risk opportunity, win a few and lose a lot, or you can be like Simms and assess risk by calculating the probability associated with each opportunity pursuit, win a lot and lose a few.  McAvoy may be entertaining and exciting to watch, but Simms’ approach is undoubtedly best for the business’s stability.  

So, what’s your starting point in assessing risk? It’s embedded in the planning process and called a SWOT analysis. Annually evaluate your company’s strengths, weaknesses, opportunities and threats. Strengths and weaknesses are internal factors that you accentuate or shore up. Opportunities and threats are external factors you take advantage of or guard against. During the planning process, assess the risk of ignoring a weakness or opportunity or leaving a threat unguarded. Evaluate the impact on the company’s overall health and, if significant, build mitigation and control procedures that address the risk. 

Examples of risk mitigation and control procedures are present every day. You wear a seat belt to mitigate the risk of bodily injury if you’re in a car accident. Control procedures are imposed by state or local statute requiring you to wear a seat belt while the vehicle is moving; otherwise, you suffer a citation and financial penalty. For businesses that rely on personal engagement with people, wearing a face mask is a risk mitigation procedure to curtail the spread of the COVID-19 virus. The control procedure would be a rule that you don’t allow anyone on your premises without wearing a face mask. Risk mitigation and control procedures serve to protect your business against loss. Make their consideration a step in your planning process. 

Roy McAvoy made it to the final round of the U.S. Open, playing against Simms and one other. The crowds watched in anticipation as McAvoy couldn’t resist the risk-reward challenge on the par-5, 18th hole, requiring him to overcome a water hazard and land the green in two. If he makes it, McAvoy clinches the tournament; if he misses, it’s the walk of shame. Watch the movie; it’s a blockbuster. Although it may be exciting to lead like a McAvoy, businesses reward leaders like Simms who assess, mitigate, and control risk in the annual planning and daily decision-making processes. 

Risk-mitigation and -control procedures protect your business against loss and are vital to its growth and flourishment. This is how you lead, think, plan and act. Now let’s get after it!  

Paul A. Raggio is co-owner, with his sister Lisa, of One True North INC Leadership and Business Coaching Solutions.

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