Articles

What is Acceptable Risk?

The biggest issues facing most retail leadership are the choices that must be made to drive growth. After all, standing still is not an option.

Flat revenues and growing costs are not sustainable.

So choices have to be made. And every choice carries with it risk because it involves changing the status quo and moving from history (what we are used to doing, with known outcomes) to future (what we must now do, with unknown outcomes).

Best practice retailers have very simple ways of doing an initial assessment of risk to make a decision on whether they even bother deeply entertaining a change.

They ask themselves these questions:
1)What is the likely upside in dollars?
2)What is the potential downside in dollars?
3)Is there any potential human cost?
4)Is there any potential customer downside?
5)Do we have any competency gaps?
6)What is our likelihood of executing successfully?
7) What is the likely outcome if we don’t do this?

By answering these questions honestly and quickly, best practice retailers soon sort out random ideas from those worth pursuing further because the upside far outweighs both the downside and the “do nothing” outcomes.

All retailers should encourage ideas and embrace the flexibility to change. However, all ideas that move toward execution must stand up to rational interrogation and be worth the organisational energy and risk.

Only then is risk acceptable.