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Avoiding Risks May Cost You
by Ron Pate

 

In my book, Leverage: A Key to Success and Wealth, I coined the quote:

“Risk and reward go hand in hand. Life is inherently risky. It is those who seek to avoid risks at all costs that ultimately assume the most risky position of all.”

Many people who have the intelligence and other resources necessary to take advantage of winning opportunities fail to do so for fear of failure or due to other risk avoidance tendencies. I've even seen this when the risk / reward equation was greatly skewed to the reward side and with solid risk mitigation strategies available.

Indeed, fear stemming from the desire to avoid risk, keeps many from venturing into the areas of life and business that truly have the potential to help them realize their dreams, particularly their dream of financial independence. But what most people fail to realize is that risk avoidance is also risky, as the avoidance of risk is also the avoidance of opportunity. And further, people fail to realize how risky life itself actually is. In fact, as long as you are alive, you’re exposed to risks.

The successful and wealthy typically have a different attitude toward risk than the general population. They work hard to understand the risks to which they are exposed, and then they work even harder to find ways to mitigate the risks, or develop strategies to deal with any outcomes that might take place as a result of the risks to which they’re exposed.
Risk mitigation is typically much more productive than risk avoidance.

Perhaps the most important tool for mitigating risks is knowledge. For example, investing all of your available funds without proper knowledge, and without financial intelligence, is a high risk proposition indeed. But investing with proper knowledge, and with the proper risk mitigation steps in place, can yield significant positive results, even though risks are present.

Risk mitigation can take many forms. For example, insurance is a risk mitigation strategy. So is the use of corporate entities to shield you from personal liability, and the use of corporate entities or trusts to compartmentalize investments.

So, don’t try to avoid risks at the cost of missed opportunity. Instead, learn and study what risks you are exposed to and develop strategies for dealing with and managing these risks.


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Copyright 2007 by Ron D. Pate. All rights reserved.