How to Mitigate Risk?
Do you know how to mitigate risk in your life and career?
This is the 3rd post in a series on dealing with risk in the 2nd half of life. If you have not had a chance to read the other posts, you can find them here.
What I want to do in this post is take you through 4 fairly standard ways to mitigate risk and how I have applied them in my life and career.
The 4 strategies are:
- Reduction or Control
You can read more about these strategies in the article 4 Effective Risk Mitigation Strategies.
The first method to mitigate risk is to simply avoid the situation altogether. Yep, we just don’t go there.
As we go through the process of identifying the type of risk we are taking and is it a real or perceived risk, we need to pay attention to what our gut is telling us.
I wrote in the post This Is Not What I Signed Up For Moment that sometimes we end up taking risks that we knew from the beginning were bad decisions.
My classical example of where I should have avoided risk was when I decided to become a high school math teacher after my near-fatal bicycle accident back in 2002. I simply did not do my homework. I ignored all the signs that the public school system was not interested in men over 40. My health and career suffered from not avoiding this risk. I recovered from both, but it was a difficult transition.
Similarly, when I started Career Pivot, I hired a business coach. My coach taught me to identify the kinds of clients I wanted to work with and those that I wanted to avoid. I learned that some clients can afford to pay the fees, but their attitudes will suck the life out of me and I need to avoid such partnerships. In the early years, I accepted a couple of clients who either had huge egos or expectations of what was possible. The relationship was doomed from the beginning. I have learned to identify those individuals and refer them in other directions.
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I have learned the hard way to mitigate risk by avoiding situations that I know in my gut are wrong.
Another method to mitigate risk is to just accept there is a risk, but to know that you will closely monitor the situation.
I discussed in the first post in this series Perceived and Real Risks in the 2nd Half Of Life that sometimes our perception of risk may be out of wack with the reality of the situation.
One way to determine whether to accept the risk is to ask the question, “What is the worst thing that can happen?”
I have taken this approach with hiring contractors and the level of due diligence I apply to their hiring. If the project is small and they fail to deliver, all that I have lost is a little bit of time and money.
I remember, but was unable to locate, a podcast episode on the Problogger podcast where Darren Rowse discussed using the what is the worst thing that can happen strategy. He applied the question to staging his Problogger conference in Melbourne, Australia. He determined that the worst thing that could happen would be weather preventing his keynote speakers from arriving from the United States. This would force him to cancel the event and possibly refund money to the attendees. YIKES, that is really bad! Therefore, he used the method of reduction or control to mitigate risk.
Reduction or Control
I discussed this in my post Recovering from My 3 Biggest Career Mistakes where I discussed a 3-part strategy to mitigate risk:
- Have a Plan B in place from the very beginning
- If you are going to fail, fail fast
- Learn from the experience
In 2 of the 3 career mistakes I made, I unknowingly followed this strategy and recovered quickly.
Sometimes you just need to accept there will be a risk. However, be willing to pull the plug when it is not working.
In the previous section, I discussed Darren Rowse’s Problogger conference and the need to mitigate risk. Rowse arranged to have Australian keynote speakers available should his U.S. based speakers be unavailable due to weather.
He knew the risks and devised a plan to mitigate the risk.
Transference is basically finding someone else to take the risk.
When my wife and I were preparing to make our first trip by car from Austin, Texas to Ajijic, Mexico, I asked around about best practices. Much of the feedback told us that the drive was an easy one and that we could do it ourselves.
I also received a number of warnings that even though thousands of people make this drive every month, you only need one mistake to turn this into a nightmare. My career has taken me all over the world and I have been in the wrong place at the wrong time many times. I always had support personnel available to help, either locally or over the phone.
What did I do? I used transference to transfer or mitigate the risk. I hired a driver to drive our car with us in it from Nuevo Laredo, Mexico to Ajijic Mexico. Juan, our driver, walked us through the immigration process and acquiring our Mexican Temporary Import Permit. I spent 2 days letting Juan drive mostly on toll roads and learning everything I could from him.
Once, after stopping at a rest stop, our care refused to restart; the battery was dead. The headlights had been left on, and much to my surprise the 3-year-old battery was failing. Juan immediately flagged down another driver in a very old model Mazda. The nice young man jumped our battery with his jumper cables. I asked Juan if everyone in Mexico carried jumper cables. He immediately replied YES.
I was not stuck with a dead battery speaking very little Spanish in the middle of nowhere Mexico. I transferred the risk to Juan to handle the situation.
Are You Ready?
Have you used any of these methods to mitigate risk? If you did, did you knowingly do it?
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