Column: Risk Management

Safe but Stifling

By: | October 15, 2014

Joanna Makomaski is a specialist in innovative enterprise risk management methods and implementation techniques. She can be reached at [email protected]

Is doing the safe thing the way to have a better result? Or does it lead to your ultimate detriment? That’s a question worthy of an experiment. As for the results, you have them here in my golfer’s (or CEO’s) guide to risk management.

I love golf. It is truly a great sport. It is a perfect balance of risk and reward — a battle of mental and physical abilities.

It is a game you play against yourself and within yourself. At the end of a day, you add up your score and know that you, and only you, own that score. There is no one to blame or steal the reward. It is all on you. I love that.

As of late, I started to focus on the impact of taking risks when playing. I wondered: If I were to take more risks while playing, would I score better? Would my risk-taking give me more rewards?

So I decided to conduct an experiment. In two rounds this month, I implemented two completely opposite risk strategies.

For the first game, I decided to play very conservatively.

I would lay-up if I thought I might get into trouble. I would use a lesser club off the tee just to keep the ball in play. While swinging, I only focused on striking the ball with an easy, smooth rhythm.

But does playing it safe and risk-free make you a winner in the long run? I played easy golf and scored well but for some reason I didn’t feel very satisfied.

My key objective was to consistently follow a process. I wanted to assure good form for each and every swing, every strike, every ball flight. I didn’t want to hit a stray shot, lose a ball, or exhaust myself beating the club into the ground.

For the next game, I went for the gusto. I took every risk I could. My focus was to make birdie on every hole. No, I wanted to make eagle on every hole. My objective was to sink every putt. Never leave a putt short. I didn’t care what my swing looked or felt like.

Indeed, I hit some majestic shots. Soaring, flying, drifting, fading, hooking, slicing, everywhere you could imagine. I lost nine balls that round and received nine penalty strokes. I was exhausted by the end.

I set my expectations so high that when I failed, I was angry and frustrated. The angrier I got, the harder I swung. The harder I swung, the less accurate I was.

When I compared the two games, I absolutely scored better by playing it safe. I hit the ball easily and it went where I expected it to go. I didn’t lose any balls and therefore didn’t have any penalty strokes. Because I set my goals with the process in mind, I didn’t care that I didn’t make par on every hole.

But does playing it safe and risk-free make you a winner in the long run? I played easy golf and scored well but for some reason I didn’t feel very satisfied. I had this nagging feeling that I could have done better. I didn’t feel as though I pushed myself. I played the easy route. Less risk meant less reward.

In the full throttle game I played as hard as I could and my voracious risk appetite caused me to score quite poorly. But somehow that form of play left me with more optimism. I imagined harnessing my best holes and repeating them for 18 consecutive holes next time. It was aspirational play.

So when it comes to defining risk appetite, I realized it is a truly tricky concept. In business, we routinely have to balance risk and reward in the pursuit of organizational perfection — the aspiration of all leaders — the perfect round, the perfect deal, the perfect presentation, the perfect opportunity.

If we don’t strive to be the best we can be, if we settle for mediocrity we may never maximize our potential.

And we may never win the green jacket.

More from Risk & Insurance

More from Risk & Insurance