THE THREE "ATES" THAT MAKES RISK PAY

Risk is defined as the potential that a chosen action or activity will lead to a desirable or undesirable outcome.

My risk in this context is not chasing after the first wild hare that comes along or dumping everything you have into some crazy business scheme.

There is a word for people who take risk for risk's sake without any thought for the reward or the potential pitfalls (getting BROKE) in this column. My experiences and submissions here is not to counsel you to take stupid risks, even if one pays off, it's going to be a matter of blind luck, not of your own preparation and ability.

The kind of Risk we are considering here is the type that is governed by three core principles called the three ATES. These are the three things you must do to make a risk worthwhile. If an opportunity comes along and involves risk, look at it in these three principles, if they all apply, then it might be worthwhile the risk. If they don't, stay away.

The three ATES:

* CALCULATE

Most of us in this part of the world have heard of the "calculated risk" at one point or the other. As familiar as these sounds a lot of investors still don't calculate before they jump into a risky venture. In calculating the risk, it helps you to identify and determine the potential problems and potential rewards, learn about the other people involved, anticipate possible obstacles and set up ways to deal with them, and so on. When you plan, you learn, you get informed, calculate and then reduce your risk.

 

In 2009 I started an estate project in Lekki the Island part of Lagos State. Returns on investment in this area are high so also is the risk. There were potential problems - how to get a genuine land, the nuisance level (omo-onile syndrome) and the risk of getting investors to buy a virgin land with no infrastructures. A lot of people were skeptical about our commitment to the project and our authenticity because this was our first estate development. Part of our calculation was to - study and intimate our clients with the area’s infrastructural growth, population growth, the robust economy of the axis, the real estate market, introduce installmental payment options (this way they also can spread their risk and decide to terminate the transaction if they sense a foul play) and show our commitment to the project by delivering on our promises and going the extra mile for them.

* INITIATE

Once you are informed and prepared and have decided that the risk is a good one, act first and act fast. Force the action. Take control by being decisive and by being a catalyst for other people.

As you initiate ensure consistency in your actions, don't relax and never, ever quit.

Persistence is one of the underrated qualities in successful risk taking. Persist by making sure you don't jump the sequence of evaluating a risk, don't initiate without calculating. Nigerians are very sugar coated when it comes to sales; take your time to x-ray every offer for hidden potential bottle necks.

Ask yourself how many billion naira companies will be in existence if their founders had quit when the risk got a little hairy? Don't quit that business now because the risk is getting hairy or becoming too challenging. The more a business grows the more exposed you are to various kinds of risk, the 419 will come after you, internal fraud will increase, unfavorable government policies and so on.

As a developer I designed a style of initiating my deals by first making an initial deposit to enable us write a contract, thereafter i take possession of the property and continue to look out for more risk before I pay off.

Make the rules work for you.

*MITIGATE

This is usually not spoken about; it means that before you dive into the risky situation, look for ways that you can benefit even if it doesn't pay off, because not all calculated risks pay off. Sometimes people drop the ball, other times people misjudge or just get unlucky (but as Christians God calls us blessed that means we are always LUCKY).

By mitigating, you might see some key business contacts you can make as a result of the opportunity, sometimes you might see another opportunity that could grow out of the first one, or there might be a new skill you could learn that you may not get anywhere else.

Mitigation also allows you to take something away from a risk that falls flat, but it helps you to see and take advantage of those extra benefits that are there even if things do work out.

Every time you evaluate an offer even if you don't deal you learn something, you are more informed for the next time.

With the three Ates, you will be well prepared for taking risk, and you will be able to recognize a stupid risk from one with the potential to take you to new heights of success.

When you calculate the risk and reward, does it make sense to go ahead with it?

Do you have the ability to take the initiative and drive the action?

Are you dependent on someone else, or worse on chance?

Are there mitigating factors that will salvage the venture if the risk doesn't pay off?

Based on the answers to those questions, you will know what step to take. See you at the top.