Learn to distinguish opportunity risks from hazard risks in your business

By Richard Tyson

I have had a lifelong curiosity regarding the trails and byways of areas throughout the world, and have enjoyed regular hikes that have allowed me to explore high Rocky Mountain vistas, deep slot canyons, sandy desert pathways leading to incredible arches and long expansive beaches on both U.S. coasts and Hawaii. The opportunity to get into the backcountry has always beckoned to me.

My life is richer for having seized these opportunities. They have expanded my appreciation for the incredible beauties of our planet, have contributed to my fitness and health and have provided critical life lessons. One of the most essential lessons has to do with risk.

There are two distinct types of risk in backcountry exploring. The first is “opportunity risk.” This is the risk of failing to grasp the opportunity, thereby losing the chance of enjoying the growth and inherent lessons that the opportunity has to offer.

Several years ago, I arranged for a group of young men to accompany me on a hike into Havasupai in the Grand Canyon. This is one of the premier hikes in the world. It includes swimming in pools adjacent to some of the most beautiful waterfalls on the planet, incredible climbs and scrambling and rare exposure to the Havasupai Indian culture.

Without any equivocation, I can say that this is an experience that you shouldn’t miss. It is an opportunity risk worth taking. Even so, I required each of the young men involved to receive parental permission for his participation. This wasn’t hard for most; indeed, several of their dads volunteered to come along. However, one mother balked. Quite correctly, she identified the second type of risk that accompanied this — and every opportunity risk — namely “hazard risk.”

This good woman felt that the hazard risks of the Grand Canyon outweighed the value of the opportunity — that it would be better to forego the experience than to risk injury or death for her son and the other boys. She was right to be concerned. This trek was scheduled for the summer with temperatures routinely above 100 degrees Fahrenheit. The canyon is home to rattlesnakes and a variety of other nasty critters. And there have been some who were badly injured jumping off cliffs near the waterfalls. Havasupai has more than a few hazard risks.

My challenge was to share how we had eliminated or substantially mitigated those risks. I shared each of our efforts in this regard, not minimizing the inherent dangers but assuring this dear mother that I had personally taken this opportunity risk without serious accidents or incidents multiple times. Finally, with some lingering reservations, she agreed to allow her son (and her husband) to join us.

The outcome was wonderful! Both father and son look back on the experience as one of the most incredible adventures of their lives. It was an opportunity risk that they will be forever grateful they took.

Entrepreneurs are the epitome of opportunity risk-takers. They see possibilities for changing the world with new technologies, new approaches to solving problems or ways to more effectively or efficiently meet the needs and/or wants of a select group of consumers.

As we look back on the history of commerce, it is the entrepreneurial opportunity risk-taker that has given us virtually every advancement we enjoy today. The light that illuminates my office came from an opportunity risk-taker named Thomas Edison. The aircraft that will soon transport me to Europe came from a couple of opportunity risk-takers, the Wright brothers. The list is almost endless.

For every great story of a successful opportunity risk-taker, however, there are hundreds of generally untold stories of those who have failed. More often than not, these are the individuals and companies that were destroyed by the hazard risks associated with their ventures.

Those hazard risks include an incredible array of possibilities, including partner risk, undercapitalization, risk of litigation, competition, compliance risk, etc., etc., etc. Like the rattlesnake that might be under the next rock in the Grand Canyon, there are endless ways you can get bitten.

So what is the answer? Should you simply decide that the inherent hazard risks associated with your opportunity are too scary to proceed? Or should you adopt the “no fear” mantra and forge ahead, ignoring the hazards?

   American author John A. Shedd wrote, “A ship in harbor is safe — but that is not what ships are built for.” The implications of his statement are clear: Build your ship (or your venture) meticulously so that it is seaworthy (as hazard-proof as possible) — and then set sail.

Richard Tyson is the founder, principal owner and president of CEObuilder, which provides forums for consulting and coaching to executives in small businesses.