All the risks that an organization or an individual can take fall into three categories. In my book, The Power of Risk (Maxwell Press), I present them from left to right on a continuum as Chosen, Optional and Avoided Risks. In the aggregate, they are labeled as the Spectrum of All Risks.
Chosen Risks are those that are required for an organization or person to function. For a manufacturing company, simply producing a product and accepting the liability it creates is a chosen risk. For a person, driving a car is an example.
Optional Risks are not mandatory to function but still taken. For a company, this could be introducing a new project, for a person engaging in some form of recreation.
Avoided Risks are those that an organization or person is not currently taking. Examples include a company acquiring another company and a person changing careers.
There are a number of points made by this concept. Chosen risks make the point that some risks have to be taken if an organization or person is to function at all. We sometimes forget that we are taking risks of some sort constantly. Optional risks are the ones we take by choice likely motivated by a potential reward. Avoided risks are where opportunity lies. They are the risks not currently taken but they’re always candidates. Finally, risks can regularly move back and forth between optional and avoided. Whether a risk falls into one category or the other is a function of organizational or personal risk posture at that moment.
