Everything in life involves some amount of risk. Driving a car? You could have an accident. Eating a banana? You could choke on it. Running? You could tumble, fall and hurt your knees. Investing in the stock market? You could lose your shirt.
Yet, we do all of these things on a regular basis. How so? Psychologically, we have learned how to minimize and mitigate our risks. We all have a risk-assessment and mitigation framework. Most of us just don’t have it written down.
In this post, I am sharing my risk assessment and mitigation framework. It is designed to answer one single question … Is this risk worth it?
The framework is comprised of five questions.
- What is the best case scenario I can expect if this risk pans out?
- What is the worst thing that can happen if it goes south, 100 miles an hour?
- Should the worst case scenario become a reality, how long would it take to get back to where I am right now?
- What things, situations or events can cause the worst case scenario?
- What can I do to mitigate these things, situations and events from happening?
As you answer these five questions, it will be evident to you whether the risk is worth it or not.