Risk Mindset of an Entrepreneur

We hear things like low risk, low reward and higher risk, better return.  Beyond these words that may sound like universal truths to some and clichés to others, we have our own perspectives and personal mindsets about risk.  But how often do we take time to pause and explore them to figure out what our own perspective is, and check in to be sure that those mindsets are serving us in the best way possible, as we work to build the future we intend?

vNacelle, a consulting firm with an Harvard Business School acknowledged process for strategic planning, accountability and execution, poses weekly questions to their clients in order to help facilitate ongoing discussion and alignment.  Recently they asked a question about the risk mindset of an entrepreneur.

The topic connects nicely to the world of Market Force as we look to reduce friction in the work environment by understanding people’s behavior under pressure.

When we acknowledge risk as a pertinent factor in the leadership conversation we can look at ways to manage our biological response to the pressure associated with risk.  Then we can make progress towards leveraging it and creating opportunity from those same risks that support our entrepreneurial efforts.

   en·tre·pre·neur

   äntrəprəˈnər/

   noun: entrepreneur; plural noun: entrepreneurs

   a person who organizes and operates a business or businesses,

   taking on greater than normal financial risks in order to do so. (Google Search)

This definition makes a direct link to the financial risks of being an entrepreneur.  Multiple studies show a strong correlation between the successful performance of a business’ entrepreneurial leadership practices and the ability to assess, manage, and optimize risk.  The financial part of risk is absolutely one aspect, but there is more.  At the heart of being an entrepreneur is the willingness to take risk by putting an idea out to the world, letting the people respond to that idea, and working with that new information to innovate further.  With every new innovation, the entrepreneur takes a risk to expose vulnerability again.  That vulnerability and willingness to take risks is critical to our commitment to being an entrepreneur and an entrepreneurial leader.  Our ideas are extensions of who we are. In sharing them we share parts of ourselves and open ourselves up to the reaction of others.  We hope some will like it.  We fear some won’t. The most important choice is how we respond to our own perception of that risk.

Understanding our own perception of risk is one way to truly upgrade our abilities as an entrepreneurial leader.  To move towards that type of understanding, we need to be genuinely curious about how we view risk.  Here are some ideas to support our curiosity about risk:

  1. Consider your global and specific mindset when it comes to risk.  Each of us has a general belief we carry when it comes to risk; and that general belief will show up on a spectrum.  For example, one global mindset when it comes to risk might be: “Risk presents great opportunity.”  As we look at the different specific instances where we perceive risk, we might notice that they land at different levels on the spectrum of what we perceive to be opportunity.  Mapping risks you face in a way that connects to your mindset can help to truly leverage the risks.
  2. Explore beyond the numbers and financial assessment.   Of course that information is important, but have you ever reviewed the financial information linked to risk and still not been sure of what the next step was?  The numbers and logic are useful, but knowing what we are really afraid of means that we can name it and face it.  For example, say your business is exploring closing a product line, and the numbers make sense, but you still don’t want to do it.  Could it be a perception that closing the line means declaring failure?  Might it be that closing the line creates a fear of missing out?  Those fears linked to taking a chance can seem real if we don’t face them and consider how we could reposition them more positively to further support our intentions.  If we leave the true fear linked to risk in the dark it can grow and live there, but bring it into the light and it can be an asset for planning making the delivery of your idea even better.
  3. Think about the role your biology is playing in the risk conversation.  The first two suggestions are examples of ways we can use our neo-cortex, the uniquely human part of our brain, to explore our thoughts. But there is a part of our brain that plays a role and an entirely different game when it comes to the risk conversation:  our “amygdala”, or reptilian brain.  This is the part of our brain that is wired for survival.  It acts as a risk highlighter, scanning the world for threats, and firing off the neurotransmitters that link to our survival strategies like fight, flight and freeze.  This is helpful when we are in the jungle being chased by a tiger but not so helpful as we look to put ourselves out there as entrepreneurial leaders.  By taking pause to ask yourself if the risk you are exploring falls into one of two categories, you can help to alleviate your pressure and engage your neo-cortex into a more logical conversation.  1) Is the risk you’re considering an actual risk? Is it a true situation that poses a threat to your life?  (If the answer is yes, engage your survival strategy and stop reading!!)  Or 2) Is the risk you are considering a perceived threat in that it poses the risk of humiliation?  Categorizing the risk you are assessing this way will create awareness and make exploration of the other conversations more possible.   

Risk plays an important role in our lives as entrepreneurial leaders.  We each have the opportunity to evolve the mindsets we hold that guide our perceptions of risk. In doing this, we can be sure that the role risk plays is one that supports, not undermines, our efforts in the best way possible.

About the Author / Karen Kersey
Karen loves working with courageous leaders that dare to go where they have not gone before; leaders that want to achieve more for themselves, for their businesses, and for the people in them. Throughout her career, she developed a reputation for drive, leadership, service, and the ability to quickly deliver exceptional results led to numerous promotions in her work history. With a strong background in strategic and operational leadership, Karen helps teams assess situations, address challenges, find solutions, and execute plans, while providing executives and managers with the direction, leadership, guidance and tools to help them perform at their very best.

3 comments on “Risk Mindset of an Entrepreneur

  1. Frank on

    Hola! I’ve been following your blog for a while now and finally got the bravery to go ahead
    and give you a shout out from Austin Texas!

    Just wanted to say keep up the good job!