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GUIDING PRINCIPLES

GUIDING PRINCIPLES

As you consider taking a risk, apply these principles:

  1. Risk only to the extent acceptable to key stakeholders.

    Once you have clarified the size of potential gains, exposure to loss, and the degree of uncertainty, decide with others who have a stake in the outcome if risks are worth potential rewards.

  2. Where the risk level is unacceptable, consider means to improve the odds of a positive outcome or to lessen unfavorable consequences.

    Evaluate such possibilities as hedging, building alliances, getting more information or control, running pilot tests, buying insurance, waiting for more favorable circumstances, gradually phasing in new operations, or diversifying.

  3. Accept occasional failure as the price of learning.

    Do not demand a perfect track record of yourself or others. One employee, who put $100,000 at risk in a development project, sheepishly told her manager that the program was a flop. When asked what she had learned from the experience, the employee replied, “You mean I’m not fired?” “Hell, no,” responded the manager. “How could I even think of firing you? We’ve just invested $100,000 in your education!” In addition to learning from experience, protect your investment with a contingency failure-recovery plan.

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