I was recently made aware of an excellent paper on risk that includes some fresh insights. The paper is titled The Two Faces of Risk – Cultivating Risk Intelligence for Competitive Advantage, was written by Steve Wagner and Mark Layton and is available at DeloitteReviews.com. I recommend it.
One of the more thoughtful insights presented in the paper is the concept of rewarded and unrewarded risks.
Unrewarded risks are similar to the concept of chosen risks as discussed in my last post. Unrewarded risks are the risks that have to be taken to function. They are focused on “value protection, not value creation.” They are the price of being in the game, if you will. And I will add that since they are mandatory in nature that they are often not seen as taken risks.
Rewarded risks, as presented by Wagner and Layton, are risks that have the potential to create value and are likely strategic in nature. These are similar to the optional risks as presented in my last post and in my book The Power of Risk (Maxwell Press).
The power of labeling the risks an unrewarded and rewarded is profound because it speaks directly to the motivation for taking them, of necessity and by choice, respectively. The concept also plays into a point I make often being that both organizations and individuals are risking more than they often perceive. It is the price of admission to what we call business and life.
