Taking calculated risks

By M.Farouk Radwan, MSc.

What is Risk Taking?

1999, Andrew sold his car, his apartment and some other items in order to raise some cash. Andrew took the money along with all of his cash balance in the bank and bought 100,000 shares of the company X.

2001, the company X filled for bankruptcy and its shares lost more than 75%. Andrew didn’t sell his shares but instead he went to the roof of a nearby building and jumped off the 30th floor.

So the question is, is Andrew a risk taker?
No you are wrong, Andrew isn’t a risk taker, he used to be a risk taker but now he is dead.

Risk Taking and Stupidity

Lots of people confuse the two terms, risk taking and stupidity. Before Andrew committed suicide, a lot of people thought of him as a risk taker but after what he did to himself everyone now believes that he is just stupid.

Risk taking is a healthy habit that can help you discover your identity and solve some of your problems but when the risks you take are miscalculated the whole process can be called stupidity.

Taking Calculated Risks

So what are calculated risks? And is there a safe way to take risks?
Yes there is, calculated risks require the risk taker to be aware of the worst possible outcome and to be prepared to deal with it.

Let’s take a closer look into Andrew's case. Before Andrew invested all what he had in company X,he should have thought of both the best and the worst outcomes.

The worst outcome in this case is losing 100% of his money and although it’s unlikely to happen still no one can predict the future.

If Andrew had given himself the time to think of the worst outcome before taking the risk he would have never put all of his eggs in one basket but instead, he would have invested less amount of money.

Be Prepared

It’s impossible to know the future and it’s impossible to know the outcome of anything unless you have supernatural powers. So if you want to take a risk then make sure that the worst outcome is bearable.

I know that sometimes we are obligated to take risks regardless of whether or not we can bear the worst outcome , in such a case you just have to psychologically prepare yourself to face the worst outcome.

if you prepared yourself for the worst you will find it easier to handle any situation that happens. A calculated risk is the one you take after you become aware of both the positive and the negative outcomes of your decision.

Increasing your Risk Tolerance

I am against avoiding risks at all just because you cant bear the outcomes and when I say you must be able to tolerate the worst, I mean you have to work on increasing your risk tolerance and not on avoiding risks.

So if you have an important task that requires that you take a big risk and if you cant bear its worst outcome then increase your risk tolerance instead of avoiding the task.

Increasing your risk tolerance can be an easy task if you are aware of the factors that currently prevent you from taking risks. Below is a list of factors that may be preventing you from taking risks:

  • Fear of Failure: If you fear failure then you wont take any risks and so you wont succeed. If fear of failure is your problem then check out the fear section to help yourself overcome your fears.
  • Emotional Sensitivity: huh? Is emotional sensitivity related to risk taking? Yes of course, how will you take social risks if you can’t bear criticism? Emotional sensitivity may limit your risk taking ability because of your inability to handle emotional pain. If this is the problem then don’t worry, this section will help you deal with emotional sensitivity.
  • Fear of change: A risk always involves stepping out of your comfort zone and that’s why people who fear change rarely take risks. If you want to deal with fear of change then read this article.
  • Fear of rejection: Another barrier to risk taking is fear of rejection. Why try anything new if the worst outcome could be rejection? If this is your problem then check out this guide.
  • Lack Of self Confidence: self confidence is being sure that you can handle a task well. If you are not confident you may fear taking any risks because you will be sure of failure. Here is how you can become super confident.

Guidelines for Risk Taking

no risk, no fun, just kidding:)

without risks there is no growth and there is no change . Avoiding risks will definitely limit your chances of success. I encourage you to take calculated risks after you study the situation well.

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