Tuesday, March 17, 2015

What is your risk vs. reward ratio?

Stuart McDaniels,
Materials Manager
Risk is something everyone faces daily. Just the simple act of driving to work in the morning involves taking risk, but we do it every day. We get in vehicles made of metal, rubber and plastic, carrying flammable at 75 mph. We drive in all kinds of weather, while dodging other sleepy motorists texting on their cellphones without thinking twice about it. Why? We make either a conscious or unconscious decision that we are willing to accept the risk of the commute for the reward of a paycheck. That’s the risk versus reward ratio. How much risk are we willing to take for how much reward? Most would agree that taking the small risk of having a car accident is worth the reward of getting to go to work every day.

Other risk decisions we face may not be as clear-cut, particularly in the business world. Sourcing decisions are a great example. The purchasing group at Trigard has to make constant decisions as to how much risk is acceptable, and how much reward we (and our dealer network) will receive for that risk. Of course, in an ideal situation, minimal to no risk would be preferred. But, in the real world, it’s just not possible. Where and who we purchase material from is critical. It’s even more important than what we pay for that material. How many times, in either your personal or business life, have you taken the risk of trying to save a few dollars only to find out later that you should have bought somewhere else? Many times, I’m sure. Of course, you learn over time to adjust your acceptable risk.

What’s your risk versus reward ratio? Thinking about that question the next time you have a decision to make can help drive you to better outcomes.

This article originally appeared in Trigard Tuesdays, our weekly electronic newsletter featuring information for the funeral industry. Sign up for your free subscription at http://www.trigard.com/tuesdays.

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