How Do You Harness Risk?

One thing inherent in leadership is risk. And how a leader views and handles risk has everything to do with how successful they are.

But there’s a common mistake most leaders make when confronted with risk. They think the goal is to either minimize it or eliminate it when, in fact, the goal is to harnessit. You see, risk is actually a powerful force to drive an organization forward.

Risk brings things into highly-tuned relief. It provides a sense of value to the decision you’re about to make. The safer the decision, the more likely you are to either stall, regress, or more slowly progress. The greater the risk, the more likely you are to leap forward. Putting a man on the moon was one of the riskiest things ever attempted in human history, but look at the huge number of technological breakthroughs that came as a result.

And here’s the kicker. The decision that seems safest may, in fact, contain the greatest risk of all.

So how do you harness risk?It’s really quite simple, but it takes courage and wisdom. When faced with a situation, you need to determine the ratio of gain to cost. In other words, what will you gain if you decide to do XYZ compared to the cost of not doing XYZ?

Let me give you an example. Recently a ministry partner was faced with a decision on whether to spend about $50,000 on a particular strategy. The gain was a potential increase in annual revenue of around $200,000 at most, and in the worst case about $50,000. The concerns were whether they were going to make budget in the short term and whether they wanted to risk spending the money.

The worst case was a short-term wash. The best case a 4-to-1 return in the short term, and a probable 10-to-1 return in the long term – at minimum.

At the end of the day, the decision was made not to spend the money, as they felt the safest course was to conserve budget and make the picture look better for the year. Their decision, however, was the riskiest decision, as it’ll slow growth and they’ll pay a high price in subsequent years due to donor attrition.

Now, let’s get honest: What decisions have you backed away from to “play it safe”? We’ve all done it. Just remember, what seems like the safest course may just end up being the costliest.

 


Rick is a 36-year veteran in fundraising and organizational development for nonprofit organizations. After serving for eleven years in nonprofit management and fundraising leadership roles, Rick began his consulting career in 1989. In 2002 he founded Dunham+Company, which has become a global leader in providing fully integrated fundraising strategy for nonprofit organizations.

Today, D+C serves over 50 organizations in the United States, Canada, United Kingdom, South Africa, and Australia, providing integrated fundraising and marketing strategies.

Rick holds a BA from Biola University and a ThM from Dallas Theological Seminary.

He is an active member of the Direct Marketing Association. Rick also serves on the board of The Giving Institute and the Giving USA Foundation. In addition, Rick is a member of The Giving Coalition, the national voice for charitable organizations in the U.S.

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