February 2018
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Eat Your Vegetables

“Risk management is too negative. We’re focused on growing our business.”  – a startup CEO

A certain Captain Smith once entertained the same certainty about large pieces of ice at sea and ignored the potential effect. He was focused on getting to New York, but that focus didn’t help him much when he ran into trouble.

Preparation is king

Old sergeants will tell you that while recruits hate digging foxholes in training, they do a remarkably effective job of it once the shooting starts. Digging a hole is a simple task easily mastered under stress, however, and managing the loss of a major client or a cash flow crisis is not.

The comparison becomes even worse when you consider that the only thing the young soldiers are missing is motivation. The two other risks require analysis, planning, coordination, and skillful execution. None of these lend themselves particularly to be learned under duress. The odds are that you will drop the ball.

Ignoring a risk won’t make it go away

We love to lie to ourselves.

“A couple of drinks make me a better driver.”
“Seatbelts give people a false sense of security that makes them take greater risks behind the wheel.”

There are a million excuses for not managing your risks. Startups have plenty to do, but the many risks they face demand risk management, not excuses. Investors can pick and choose where they put their money, and telling them that you don’t intend to manage your risks will not impress.

Do what needs to be done

No teacher of mine would claim that I was eager or prompt in the homework department. I did the bare minimum necessary. I understood that ignoring homework did not make it go away, that it was a requirement to pass, and that I wanted to pass. Far too many firms have not made this connection.

Do your risk management homework. And eat your vegetables.

1 comment to Eat Your Vegetables

  • “Startups have plenty to do, but the many risks they face demand risk management, not excuses.”

    I feel like startups have even more risks to manage than established businesses, simply because they are a startup; it’s the nature of being a new business. You don’t have a solid footing in any one direction and one big (and unplanned for) crisis can completely level a new business.

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