How Should a CEO Handle Risk?

I often counsel my team on how to help our customers and prospects address risk when it involves purchasing and implementing a new IT solution.  Besides setting the end goal, I think mitigating risk is the key issue that CEOs think about when embarking on a new project.  There are always unknowns that need to be assessed, weighed, and addressed.

But setting the goal itself can also be viewed as a risky endeavor.

I am currently adding a new business unit to my company.  It involves a huge capital expenditure but the returns will be great.  Whereas, I expected the entire team to rally around this new business, I have been somewhat surprised to discover a huge air of caution.   Logically, you would think that I have more to lose so I should be the most reluctant to jump into an unproven situation.  But this is far from the case.    Everyone wants to proceed cautiously, test the waters so to speak, while I am willing to “go for it”.

Why am I the most “risky” person in this scenario?   Isn’t the CEO supposed to be the levelheaded, ultra-cautious one?

Curiously, most CEOs I know are also entrepreneurs.  And they are THE biggest risk-takers in their companies.   They take risks every day.

Some entrepreneurs take risks in their personal lives as well.  They adventure into the unknown.  Famous entrepreneur Richard Branson has publically crashed balloons, survived shipwrecks, bailed from doomed aircraft, and speed-boated across the stormy Atlantic.   One of CompuData’s own clients was the first American explorer to cross Antarctica to the South Pole alone, on foot and with no assistance.

While that may seem extreme, think about it.  Wasn’t it a risk for Bill Gates to drop out of college to start Microsoft?  Wasn’t it a risk for Jeff Bezos to leave a high paying job at a Wall Street hedge fund to drive across country and start up Amazon in his garage?

Why do some take the risks and others play it safe?  I did a little research, but most psychology articles on risk takers focus on sensation/thrill seekers.  These are people that engage in novel and extreme activities to achieve pleasurable neurochemical brain activity.  Although, I might classify Richard Branson as a sensation seeker in many parts of his life, many entrepreneurs don’t fall into that category at all.  Can you imagine Bill Gates crossing the arctic?

Continuing my research – don’t you just love Google? – I was surprised to see that the majority of articles position and even define “risk” as a “bad,” “dangerous” or “self-destructive” behavior.  For instance, it’s no stretch to substitute any of those words for risky in the article: Adolescent Brains Biologically Wired to Engage in Risky Behavior.   It seems that the concept of risk has an overwhelming negative connotation in the bulk of the world.

Lightbulb!  What a revelation!  Maybe that’s the difference.

I personally don’t think of risk as some sort of “high” (I am not a thrill-seeker) nor do I view it as “bad” to be avoided at all costs.  I equate risk with uncertainty.  We try our best to minimize the uncertainty around every decision, but it is there nonetheless.  It doesn’t have to be chased or avoided.  It just has to be assessed, weighed and addressed.

I will move forward with my new business unit.  I know that the outcome will be good and that the return will be within a year.  But is there risk?  Sure.

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