Risk Mitigation Tools An Orderly Way to Consider Downside Risks
Risk Mitigation Tools: Entrepreneurs that survive tend to be very good at risk mitigation, or considering the downside risks of their actions. Ignorant people tend to describe entrepreneurs as ‘risk takers’. This is not the case. They are controlled risk takers.
Sometimes they just do it instinctively, but more often the risks of their actions are both carefully calculated and considered. In either case thinking carefully about consequences is time well spent. Using the risk mitigation tools below are a handy way to do just that.
Personally, I like the idea of creating the new venture with one or more MVPs, or Minimum Viable Products. Too many budding entrepreneurs go for all the bells and whistles from the get-go. I have seen people so intent on perfecting their prototype that they never actually start a business. Minimum viable products (the concept comes from Lean Startup and Eric Reis) should always be accompanied by MVP—Maximum Value Proposition (a concept created by Alan Albert, the co-creator of FileMaker software). Have a look at my tool, the Value Proposition Matrix.
Here are two risk mitigation tools that can be used to make assessments.
The left hand risk mitigation tool enables you to think in an orderly way about alternative plans of action that you may be considering. It will help assess costs, benefits and the risks associated alternative plans.
The right hand risk mitigation tool then enables you to think about impact levels of the alternative action plans to mitigate the risks you have identified—and the likelihood of the worst coming to worst.
As well as using my risk mitigation tools, I suggest that you read my post on Reducing Risk to Startup Safely—Successful Entrepreneurs Know How to Deal with the Downside. I wrote it with the benefit of hindsight from starting my own new venture. Strategyzer, the site of Alex Osterwalder (the creator of the Business Model Canvas) has a great Library of Ideas, learnings and methods to help you further your understanding and practice of innovation and reduce risk