3 Ways to Tell When a Risk is Worth It
By approaching risk in a way that’s informed, values-driven, and purpose-filled, you may feel ready for any potential outcome. This means you’re well prepared.
Risk. The word itself can bring up scary images and anxious feelings. But not all risks are created equal, and not all risks should be avoided. How can we tell the difference and conduct our own risk analysis?
Risks come in all shapes and sizes. They can be professional, like deciding to leave a stable job to start a new business, or personal, like telling someone you’ve fallen in love. There can be risk involved in our financial decisions, like investing, or even physical challenges, like running a marathon.
With any risk, there’s the possibility of loss. And when we know we could lose something, we feel pretty vulnerable.
Here’s the thing about vulnerability, though: As researcher and author Brené Brown puts it, “vulnerability is the birthplace of innovation, creativity, and change.” It can be the means to drive us forward from the status quo and toward the lives we want to lead.
And you can’t have risk without vulnerability, and vice versa.
The challenge, then, is knowing which risks we should take. It’s understanding which risks will bring potentially great results, meaning, and reward to our lives and to those we love. It's knowing when to be bold, and when we should be risk averse.
So, how can we do our own risk assessment and know when is a risk worth taking? Here’s how you can find out.
Risk Assessment 1: Get Informed
We say it often here at COIN, but it’s true: Knowledge is power. The more you know, the better prepared you’ll be to make informed choices that can set you up for success. So, if you’re thinking about a decision that seems risky, don’t just leap – learn!
The first thing to do is find out more and do your own risk analysis. Thinking of starting your own small business? Talk to other local business owners to learn how they did it, or sign up for an entrepreneurship course at your local adult education center.
Want to invest your money, but don’t know where to start? Check out our blog articles or speak to a trusted financial advisor.
Debating whether to move to a new city? Compare job prospects and average salaries, housing costs, and quality of life scores to where you live now. You can also check out local news sites or spend a long weekend in town to get a sense of what day-to-day life is really like.
As you learn and do your own risk management investigation of sorts, you’ll get a better sense of what the risk actually entails and how it could affect your specific situation. And to move closer to making a decision about whether to take that risk, you can then use your values as a guide.
Risk Assessment 2: Lead with Your Values
After you’ve gotten informed, it’s time to get a little more personal. Instead of asking “is this risk worth taking?”, the question becomes “is this a good risk for me?” It’s all about taking what you’ve learned during your risk assessment and seeing how it aligns (or doesn’t) with your personal values.
For example, you may want to take a new job with a higher salary, but the company is less stable than where you work now. It’s a great opportunity, but it’s also risky. What do you value more—earnings or stability? Thinking this over may make you feel vulnerable. Remember, that’s OK! The goal is to dig deep and find an answer that will help you decide what to do.
“Before you can answer whether the risk is worth taking, ask yourself this: Is this my purpose?” says executive coach Farhana Huq on the Ellevate Network. “When we are on purpose, we resonate more, we feel excited and invigorated.”
Whatever big decision you’re considering, think about all you’ve learned so far during your risk analysis and take note of how it makes you feel. Do you feel enthusiastic? This risk could be one worth taking. Panicked? Maybe better to do nothing for now. A little bit of both? Probably best to do even more research.
When thinking about doing something unknown or unfamiliar, the goal is to “create clarity around what your gut is actually telling you,” says Alex Lickerman, M.D., in Psychology Today.
In other words, understanding your feelings is important, but also make sure to keep those emotions in check. Using a combo of facts and feelings will give you a sense of whether you really want to take that risk.
And by approaching risk in a way that’s informed, values-driven, and purpose-filled, you may feel ready for any potential outcome. This means you’re well prepared.
Risk Assessment 3: Be Comfortable with Uncertainty
When you’re prepared to take a risk, this means you’ve studied the possible outcomes and are good to move forward. With investing, for example, this could mean that you first build up your emergency fund, and then start investing a manageable amount for your budget each month. Because you’re informed and prepared, you know that if the market takes a downturn, you’ll be able to handle it.
Or, it’s deciding to ask your partner if they’d like to get married, even if there’s a chance they’ll say no. You’re willing to risk getting your heart broken, because a “yes” could bring you so much joy.
When doing any risk assessment, blogger Autumn Elizabeth encourages informed soul searching. On Tiny Buddha, she shares how she decided to make a potentially risky move overseas. “To most people … I looked like someone who had risked way too much,” she says. “The fact was I had calculated the risk for myself, based on factors most people couldn’t see or didn’t know, and I knew that … I could handle the risk I was taking.”
Ideally, you’ll take the same approach. Even with uncertainty, it’s all about knowing the possible outcomes from your risk and whether you’re prepared for them. Ideally, you won’t have to deal with the bad outcomes – but if you do, you want to be confident that you’ll be OK.
“Take calculated risks,” the famous U.S. Army General George Patton once said. “That is quite different from being rash.”
So, which risk will you decide is worth taking?