All risks, good or bad, have one thing in common: each require investment. This investment typically involves money and time.
Good risk vs. bad risk
- Measurable/Quantifiable – Good risk is risk that may be measured and quantified through due diligence (homework). If the associated fee of potential outcomes just isn’t measured/quantified, measurable/quantifiable, then you definately are taking a foul risk.
- Identify Uncertainties – If you’re in a position to discover all potential outcomes, good or bad, and you’re in a position to plan for all potential outcomes, then you definately are a great risk taker. When uncertainties are unknown or unknowable, it’s a foul risk.
- Probability of Success – If the probability of success is high, you’re taking a great risk. If the probability of success is low or unknown, you’re taking a foul risk.
- Fundable – A risk that may be adequately funded within the worst-case scenario is a great risk. If, within the worst case scenario, you run out of capital, that is a foul risk.
- Probability of Failure – If the probability of failure is low, you’re taking a great risk. If the probability of failure is high, you’re taking a foul risk.
- Understandable – If you possibly can understand the style of risk you’re taking, then it’s a great risk. If you can not understand the character of this risk, you’re taking an enormous risk.
