not definitely an option
People agree that starting a business is risky and although the failure rates might not be as dire as people like to say, 20% fail in their first year and only 50% make it to five years. A decade in, only 30% are still around. (Stats courtesy of Fundera.)
And a tech startup takes that to a whole new level because of the additional layers of uncertainty that technology imposes. Startups risks are significant.
Unlike a coffee shop or shoe store which can use relatively accessible market data for planning, most tech startups are operating in newer, untested areas. Some are even pushing the boundaries of medical science or the laws of physics. And startups aren’t a single sector so there is no single model geography, market or user-group for a startup.
However, you’re an entrepreneur with a vision so you aren’t going to stop tackling your world-changing idea just because the odds are stacked against you. But what can you do to improve those odds?
Conducting a risk assessment is a big project and, like any big project, there are lots of things between you and success. However, there are five common risk assessment problems that crop up time and time again. These make the difference between success and failure no matter what else you do. Keep these five problems in mind and plan accordingly to maximize the chances of success with your next risk assessment.
I received an email a while back from someone just making their start in risk management asking if I had any thoughts or advice on the risk management skills they needed. The response quickly became several pages long and I thought it was worth turning it into a blog piece that others might benefit from. (This could also be titled ‘letter to a 30-year old me’ or a 40-year old me….)
Getting started in any career or specialist field can be daunting and risk management is no different. There are many challenges out there and some will continue to crop up as long as you are practicing risk management. Here, in no particular order, are 10 risk management skills or abilities you should look to develop as you embark on your career as a risk manager.
1. Identify the differences between theory and practice
Most people have some kind of theoretical training before they get their start in risk management. Even someone who has been a practitioner should formalize their knowledge and skills before taking on a risk manager role.
I originally answered this question on Quora here.
In some ways, all risks can be considered subjective for two reasons.
Firstly, how we perceive risks is a very personal matter based on in-built biases, the experiences we have had and our current situation.
An example from a well-known risk textbook is an icy sidewalk. A child might see that as a fun thing to slide on so their perception is that there is no risk. A retiree will perceive this as a high risk as their chance of falling and becoming injured is higher and more debilitating. If a kid falls, they usually just get up and carry on with what they are doing.
Here, the perception of the same situation is very subjective.
Secondly, how a similar situation affect an individual or group depends on their particular circumstances.
Two major events are going to happen in US within the five years. One is a replay of the US subprime mortgage collapse which spawned the 2008 financial crisis. The other will occur when the bubble of college debt bursts. Both events – one of which may well trigger the other – will cause massive strain on US banks with potential global repercussions.
This isn’t a bold claim. There are lots of people, all of whom much more familiar with this kind of risk than I am, sounding similar alarm bells. For example, the day after I started writing this, the Financial Times’ editorial was on a similar topic. And there may be other significant events that occur in addition to these but making forecasts about what’s going to happen isn’t the point of this article.
It’s about why these events are going to be largely the same as previous events, despite there being opportunities to identify, mitigate and avoid these risks.
And it’s about how you need to avoid making similar mistakes in your organization.