How to Assess Risk And Make the Right Career Moves for Your Future

Posted on October 24, 2023 by Justin Gerard, One of Thousands of Career Coaches on Noomii.

Are you comfortable with risk-taking? If you had asked me this question during my teenage years, my enthusiastic response would have been, “Absolutely! I eat risks for breakfast.” However, as I ventured into various fields, including engineering, project management, safety and health, finance, coaching, psychology, and neuroscience, my perspective on risk underwent a transformation. Today, my approach to risk is less about thrill-seeking and more about making choices that align with my vision.

My hope is to guide you in taking calculated risks towards your dreams and goals because I believe everything you desire is outside your comfort zone. This requires the courage to take the step. However, sometimes the potential downsides can be quite detrimental. If only we were more aware of the consequences, we could make better decisions. During my coaching sessions with some of my clients, I’ve often heard, “I wish I had known about this before making that decision.” Sometimes, we neglect taking time to think and investing time in diligent decision-making processes, instead choosing to sleep on it and make a decision the next day.

Understanding Risk

Risk is inherently characterized by the uncertainty of outcomes and the potential for adverse consequences. These risks can range from minor inconveniences to life-changing events. To make informed decisions and effectively manage uncertainties, it’s crucial to understand how our brains process risk.

The Role of the Human Brain

Our brains are remarkably designed to ensure our survival and protect us from threats. Throughout evolution, various mechanisms and structures have evolved to help us detect and respond to dangers in our environment.
In my experience, risk decisions can be categorized into two distinct approaches. One involves fast, intuitive, and emotional responses, often rooted in past experiences, heuristics, and biases. For instance, if past cold-calling attempts resulted in rejection, you might approach the next prospect with caution.
On the other hand, the slow, deliberate, and rational system drives analytical thinking and decision-making. It entails weighing the pros and cons of a situation based on logic and evidence. For instance, when considering an investment in a new stock, you’d gather information, consult financial experts, and thoroughly assess the associated risks.

A Neuroscientific Perspective

From a neuroscientific standpoint, the brain processes risk through several distinct regions:
The Amygdala: Responsible for processing emotions, particularly fear and anxiety. It triggers the fight-or-flight response when we perceive a threat.
The Insula: Involved in processing bodily sensations, emotional responses to risk, and potentially influencing decision-making.
The Striatum: Responsible for processing rewards. When we take risks and receive rewards, the striatum releases dopamine, associated with pleasure, reinforcing risk-taking behavior.
The Prefrontal Cortex (PFC): Manages executive functions, such as planning, decision-making, and impulse control. The PFC helps us evaluate the risks and benefits of a situation and make rational choices.

The Significance of Taking Risks

Taking risks is an integral part of achieving success. It’s essential to differentiate between confident, calculated risk-taking and recklessness. Many people shy away from risks, hindering their progress, while high-performing individuals embrace calculated risks. It’s crucial not to confuse risk with danger; risk pertains to the probability of danger, while danger involves life-threatening or severe harm.

Three categories of risks exist in life:

Risks You Must Take to Stay Relevant: These are often unavoidable, especially for business owners. They encompass hiring, promotions, and advertising. Employees and freelancers must take these risks to demonstrate their value, approach prospects, assume responsibility, and achieve results.
For example: A junior staff member who aspires to advance in their career understands that seeking a promotion is crucial to stay relevant within the organization. Pursuing the promotion might require them to lead a new team, which is a risk they must take to demonstrate their leadership capabilities.

Risks You Can Afford to Take: These involve actions and decisions with no guaranteed outcomes but are vital for personal growth. In business, these might include experimenting with new marketing strategies, creating innovative products, or, for employees, attending interviews for career growth.
For example, a professional in the technology industry recognizes the importance of staying updated with emerging technologies. They decide to take a course in a new programming language, even though they’re uncertain about its immediate application in their current role. This risk, though not guaranteed to lead to a promotion, contributes to their professional development.

Risks You Cannot Afford to Take: These carry potentially severe consequences for your business or employment. They may seem enticing due to high potential rewards, but the downsides can be devastating. For instance, pivoting in your career.

Assessing Risk Process

Identifying Risk
To assess and manage risk effectively, categorize risks into two perspectives: those imposed from external factors and those you willingly accept. You can identify risky situations through intellectual awareness and feelings of unease. Based on the 3 risks above, the risk you must take, risk you can afford to take and the risk you cannot afford to take.

Assessing Risk:
When evaluating the balance of risk and reward, employ a simple probability-based tool. On a scale of 1-10, assess the positive and negative impacts of a specific action in your situation. After this assessment, decide whether to take the risk. If you proceed, be prepared for the consequences.

Decision:
Decide whether or not you are going or not you are taking the risk. Once you decide to take the risk, then take action and be prepared for the consequences.

The Repair Stage:
We might have made a decision the the potential upside is higher than the down. We might have imagined this and made up the mental movie in our head of everything going well and there are no obstacles. However life can always throw a curveball. Becoming comfortable with risk also involves preparing for the possibility of being wrong, a stage known as “repair.” In this stage you may decide on when are you going to change your mind, what and when are you going to pivot, and what is your plan to get back on track if this doesn’t work out?

Let’s imagine a situation here. Imagine that you’re considering a career change to enter a highly competitive industry, such as becoming a freelance marketing solution provider. You evaluate the risk of this move using a simple probability-based tool.
Positive Impact: On a scale of 1-10, you determine that this career change has a potential positive impact of 9. This new field offers higher earning potential and aligns with your passion.
Negative Impact: On the same scale, you evaluate the potential negative impact as 7. The negative aspect revolves around the initial financial instability and the risk of competition in the freelance market.
Decision: After assessing the balance, you decide to take the risk based on the positive impact outweighing the negative. So you take the leap of faith and make the switch.

Repair & mitigation
Now, in the repair stage, you prepare for the possibility of things not going as planned. You recognize that, in the world of freelancing, there may be periods of financial instability.
You build an emergency fund: You set aside a financial cushion that can cover your living expenses for several months, ensuring you can weather any financial storms that may arise.
Learning & Growth Plan: You commit to staying updated with the latest marketing trends and technologies, making yourself adaptable and resilient in a dynamic market.
Diversify your client base: Instead of relying solely on a few big clients, you aim to diversify your client base. This involves seeking projects from various sources, which will reduce the impact if one client or income source falters.
Networking and mentorship: You actively network within the marketing community and seek mentorship from experienced freelancers. This way, you gain insights and support from those who have navigated similar challenges.

By incorporating the repair stage into your decision-making process, you’ve not only evaluated the risks but also put in place proactive strategies to address potential setbacks, making your transition into freelance more manageable and resilient. I hope I have provided you with a simple tool to assess risk and the decision-making process. With this tool, I hope you can take the necessary steps to move forward towards your dreams and goals.

Remember, you’re capable of anything you set your mind to. Just believe in yourself and don’t allow fear to stop you, use it to be prepared. I would like to end this with this article with a favorite quotate of mine "What would you do if you knew you couldn’t fail?- Robert Schuller”. Think about you dream and goals, assess your risk and take Bold Action!