Risk Management Profiles

It seems that as companies become more successful they shed their appetite for risk. That seems counter-intuitive when you think about how much more difficult it is to keep large brands growing.

We don’t have to look very far to see examples of companies that have failed to take bigger risks. Research in Motion is a tragic tale of a one proud and mighty company that seemed to have lost its appetite for risk.

At the RS4 Marketing Group we think of companies as having three different profile types. Risk Adopters, Risk Managers and Risk Avoiders.

Risk Adopters

These are companies that are typically small, in growth mode and will generally do whatever it takes to grow the company. This includes challenging any status quo or process that doesn’t improve the business. New products and services are introduced quickly, changes to existing products are made on the fly all in an effort to maximize the opportunities that are presented.

There is no fear because there is very little to lose. There is very little brand equity at stake, the capital investment is limited and the jobs on the line are small. These entrepreneurs are “all in” when it comes to taking on risk because their bets aren’t big or cost them that much if they fail.

Risk Managers

These are typically larger organizations that have an established customer base, are generating sizable revenue and have become more legitimate businesses. These are companies like Lulu Lemon and Wind Mobile. Their appetite for risk is there but diminishing because they don’t want to lose what they have accumulated. They see a nice rosy picture in the future and want to start to reap the rewards of their hard work.

These can best be described as well run businesses that still need to grow in order to survive and are driven by the challenge of introducing new products and services. These companies aren’t big enough to challenge on the global stage but are well established in their local markets. They might have a small share of a large market. Risk is something they live with everyday and are comfortable with it.

Risk Avoiders

These are typically well established global enterprises with well known brands like Coca Cola, Nike and American Express. These businesses have significant brand value at risk and manage things very closely in order to minimize risk to the brand. These brands are vulnerable to lawsuits, public scrutiny and regulators. As such they navigate the murky waters of risk with extreme care.

Big bets are not what these companies are all about. Risk is assessed from all angles. They have the resources and financial leverage to hold off competition. These companies have the most to lose. A balance of risk taking and business management is essential in order to maintain growth.

risk management

It’s natural for a company to transition from one profile type to another as it matures however if done too quickly it can be trouble. Research in Motion is an example of a company that moved from risk taker to risk avoider too quickly and is now suffering the consequences.

A good CEO knows when to hold em and when to fold em…….being too conservative can be just as bad as being too aggressive. In either case, a company needs to be constantly working on new products and pushing the envelope or it will finds itself overtaken by a competitor.

To learn more about how we can help you manage your new product development process contact us today at 1-416-435-5290

Recommended Posts

Leave a Comment