All Things Inspired

If you never take risks, you'll never know exactly what you're capable of!

We concluded the last article in this series that if you risk nothing you are really risking everything. Hockey great, Wayne Gretzky once said that you'll miss 100% of the shots that you don't take. Yes, risk can lead to failure, and you will fail sometimes. However, life is all about taking risks. If you never take risks, even though you know you might fail, you'll never know exactly what you are capable of! When you try something new, there is a risk of failure. But when you don't, you have almost certainly ensured that you will fail.

Taking risks isn't just about putting all your chips on one number and casting your fate to a pair of dice. That is the purest form of risk. Or as Mark Twain once said, "A fool and his money are soon parted!" What we are discussing is the realization that risk is needed but doing so in a calculated manner. To do this we first need to look at a gap analysis of the situation and then assess the risk to develop a plan of action to manage the risk.

The process of gap analysis is understanding where you are today versus where you want to be tomorrow. Or, in other words, where are you now without taking the risk and if you do take the risk, what do you stand to gain or what position will that put you in after taking the risk? Let's take a closer look at these simple steps:

Identify the risk - what do you need to consider doing to continue the path to your goal successfully?
Factors - what are the risk factors involved that will influence your ability to take the risk with success?
Current status - where are you at in the situation? Do you have the tools or support needed to take on the risk?
Filling the gap - what is the actual gap to where you are at in the process versus where you want to be? What steps, with the tools and support that you have, do you need to take to bridge this gap between where you are at and where you want to be?
Execute an action plan - do you have accurate indicators of how you will measure successful completion of bridging the gap?

Risk assessment is the continued flow of a gap analysis. It allows you to further evaluate the risk you identified in gap analysis and prioritize the threats of the potential risk. One of the best ways to assess the risk you face is to create a matrix that will compare the likelihood of something happening risk related to the consequences involved in the risk. You can simply do this handwritten on a piece of paper. Take a moment to try this. Down the left side of your matrix would be the levels for the "likelihood of risk". To start this process, let's use the indicators "probable", "occasional", and "not likely". Across the top of your matrix would then be the "consequences of risk". For your indicators here, let's use "critical", "moderate", and "insignificant". This gives you nine combinations with in your matrix. For this example, we'll use a scoring system. The more likely, the greater the number. The more consequential, the greater the number. Each of the nine combinations would have a risk level, with a grading score determined by multiplying the likelihood of risk by the consequence of risk. Here's what the nine combinations might look like...

Likelihood-Probable (3), Consequence-Critical (3) = high risk (9 points)
Likelihood-Occasional (2), Consequence-Critical (3) = high risk (6 points)
Likelihood-Not likely (1), Consequence-Critical (3) = medium risk (3 points)
Likelihood-Probable (3), Consequence-Moderate (2) = high risk (6 points)
Likelihood-Occasional (2), Consequence-Moderate (2) = medium risk (4 points)
Likelihood-Not likely (1), Consequence-Moderate (2) = low risk (2 points)
Likelihood-Probable (3), Consequence-Insignificant (1) = medium risk (3 points)
Likelihood-Occasional (2), Consequence-Insignificant (1) = low risk (2 points)
Likelihood-Not likely (1), Consequence-Insignificant (1) = low risk (1 point)

For All Things Inspired subscribers, we'll provide an actual matrix grid example in the weekly subscriber extras. If you're not a subscriber, you should consider becoming one. For now, you'll have to imagine the grid and how the two axes would layout.

Again, the combined rating is multiplying the rating of the level of likelihood by the level of consequence of risk. Here's a quick look at the rating scale:

A combined rating of 1 to 2 points = low risk
3 to 5 points = medium risk
6 to 9 points = high risk

As you begin to examine this exercise against a risk you are facing you start by asking yourself, "how would I rate the likelihood of the risk and what is the consequence of the risk?"

Now let's review the steps to creating a risk assessment matrix. Please keep in mind that this is not an exercise for the sake of saying you put together a risk matrix. It should be reviewed regularly and reflected upon as you acquire additional information related to the risk, or even a change in your desired outcome. First review the previous example, then review the following steps in creating your own matrix.

The steps to a risk assessment matrix:

Define it - what is the particular risk? What will you use as criteria in assessing, categorizing, and prioritizing your risk? You may determine to have different indicators than the example matrix we covered above. If you're unsure, start with the example above and as you start building it, you may even want additional indicators on each axis. It's your matrix! Define it and create it!
Grid layout - you've defined the indicators to assess the risk by. Now it's time to create the layout of your grid. Again, you can start as simply as scratching it out on a piece of paper.
Evaluation ratings - this is where you assign your own rating system. You can basically have an "X" axis multiplied by a "Y" axis. For example, you have a risk that you think is going to have a likelihood of probable with a consequence of moderate. You simply take the probable rating of 3 multiplied by the moderate rating of 2, giving you a risk assessment value of 6. As we said earlier a risk assessment rating of 6 to 9 points was high risk.
Determine action needed - once you have assigned a risk assessment rating, you need to determine the level of action needed to address the risk. Here's an action breakdown: Low risk (1 to 2 points) is likely to not be impactful, so no further action is needed, medium risk (3 to 5 points) means you should consider in greater detail if action is needed or if this is optional based on the risk, and finally, high risk (6 to 9 points) should be addressed with urgent action.
Analytics and prioritization - at this point you know what action is needed, now you need to analyze the matrix for highest priority of risk. You can do this by X axis in relation to Y axis. For example, if the likelihood is probable and the consequence is critical, that should have your immediate attention as opposed to a high risk that is probable in likelihood and a less moderate consequence.

This may seem like quite a bit of information around building a risk assessment matrix, however, try this out. Review the information up to this point again, and continue to give this system a try. If you want to start with something simplistic, just list out on a piece of paper the "pros" and "cons" of a potential risk. Congratulations, you just created your first risk assessment matrix!

The more you use this tool, the better prepared you will be to manage the risk. How do you suppose you will get better at taking risks, that is in addition to starting with the pros and cons? Well, using a matrix as a tool is the first step. Some other things you can do to improve would include...

Don't let fear of failure keep you from trying to create an assessment matrix. You may fail with risk taking initially, but the more you try this method the better your chances of success.
Always think about what you stand to gain! Sure, it's easy to stay in the status quo and continue on the path you're on. But wow, can you just imagine the sense of accomplishment you will feel if you begin to see the upside of change?
Baby-step your way to risk assessment. Make incremental progress in taking risks. Don't expect yourself to be an expert risk taker at first. It takes time to develop this challenging part of transformational growth.
Find a mentor who has been where you are on your journey. Study what successful risk takers have done to get where they are today.
Focus on what you can control. You'll gain a sense of this as you go through the process of assessing risk. You'll be able to determine what risks you have the best chance of controlling and those you should steer clear of if you are unable to control the risk.

Risk taking is about tackling the uncertainty we face in life. It means you manage by being mindful of risk and what's involved in taking the risk. When you decide to take on a risk, you begin to consciously choose discomfort over complacency. Success then becomes more intentional. You don't just happen into success.

It's been said that if you don't take risks, you become subservient to those who do. Remember as we noted earlier in this topic, when you try something, there is a risk that you will fail. But when you don't, you ensure it! Dare to risk! Dare to...

Be inspired! Inspire others!