What Is Your Business’s Tolerance For Risk…?

Michael D. Moberly, Principal, Founder kpstrat and ‘Business Intangible Asset Blog – Business Intangible Asset Strategies and Risk Mitigator

I often hear experienced risk managers (as well as business leaders, management teams, boards, and investors) express a view that it’s impossible – implausible to try to eliminate, or perhaps, mitigate, all business risk. 

I argue, today, and for the foreseeable future, that mitigating (not eliminating) risk to business’s ‘mission essential’ intangible assets, ala reputation, image, goodwill, etc., is variously about recognizing – defining ‘tolerance’, e.g.,

  • how much targeted – personalized risk can a business’s reputation, et al, receive, and actively try to mitigate, before same is considered irreversibly detrimental to mission sustainability.

Agreed, it would be imprudent and a costly undertaking for any business to try to eliminate – mitigate all business risk. Practically, efforts to do so would likely inhibit, perhaps wholly stifle a range of customary – necessary business activities, initiatives, and/or transactions, by rendering same variously off-putting, more time consuming to negotiate, and costly to execute.  

Too, because a not insignificant percentage of ‘business risk’ originates externally, the implication would be that particular-interactions (technological) which businesses obviously rely – depend, would be variously curtailed, and/or more closely scrutinized and monitored. Yes, aspects of either are (fiduciarily) obligatory and variously required – mandated, it’s unlikely ‘the horizon’ is unreceptive to curtailing the keystroke speed which external communications and transactions occur and are embedded in business practices.

For good reason, pursing a path to eliminate – mitigate all business risk is neither prudent, nor feasible.

But, before we wholly dismiss the principle of (at least) endeavoring to ‘mitigate particular-business risks, we are obliged to reflect – consider our business’s ‘tolerance’ of-to-for particular-types-levels of risk materialization, and how tolerance may be more specifically – transactionally defined + assessed, e.g.,

  • factors – variables which influence (+/-) our business’s tolerance to particular-types of risk…
  • how – when – why – where, and the speed which particular-risks can – do materialize, and the adverse effects which are ‘felt – experienced and cascade within + beyond single business enterprise’…
  • whether – why those adversely affected by a particular-risk will likely argue (ex post facto) some version of, those risks ‘were known + should have been mitigated’, thereby creating reputational risk and undermining a business’s operating culture and valuation, etc.

For these reasons (and others) I encourage readers (business leadership, et al) to avoid focusing (primarily – solely) on the ‘what if’ factors – variables of risk materialization, i.e., the vulnerability to – probability of, etc. I do not suggest either should be wholly dismissed.

I do encourage business leaders to consider the ‘criticality’ of the occurrence of particular-business risks, e.g., if – how – when – where – why + which riskscan/may materialize asymmetrically, @ keystroke speeds, @ particular times, and cascade virally – uncontrollably…

  • with defense of business – brand – product – service being the initial + the expected near-term response (option) to try to mitigate the (immediate) adverse effects from…
  • cascading further – more detrimentally to a business’s mission, integrity, brand, standing, and its underlying intellectual, structural, and relationship capital, ala the intangible assets a business relies – depends and are deemed ‘mission essential’.

The resiliency + defensibility of a business’s ‘mission essential’ intangible assets translate, in my view, as the…

  • residual strength of + receptivity w/i a business’s ‘operating culture’, and its chain of customers, buyers, clients, consumers, investors, to be tolerant,
  • if -when particular-types of risk materialize publicly, alarmingly, and vehemently.

(This post was inspired by the work of Dr. Marc Siegel)

The ‘Business Intangible Asset Blog’ is experientially-researched, written, and produced by Michael D. Moberly, to provide perspectives, insights, and additional and sometimes alternative perspectives to readers, ala business leaders, management teams, boards, and investors, etc., to aid in identifying, distinguishing, assessing, valuing, safeguarding, and lucratively – competitively utilizing -applying their ‘mission essential’ intangible assets. 

Readers are-encouraged to review and comment on this, and other posts wherein arrays of issues related to business things intangible are authentically and practically conveyed.

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