Bloomberg Businessweek

DON’T PLAY IT (TOO) SAFE

Are you risk-loving or risk-avoiding? Knowing your own tolerance will make you a better decision-maker

Risky business, as every chief executive officer knows, is a redundant phrase. “To create value for shareholders, you inherently must take risks,” says Todd Gormley, an associate professor of finance at Washington University’s Olin Business School.

Although some CEOs embrace Alexander Smith’s notion that “everything is sweetened by risk,” arguably more favor Edmund Burke’s belief that “early and provident fear is the mother of safety.” Somewhere between lunatic risk-taking and paralyzing risk aversion exists a sweet spot of daring but prudent action. Finding this is as much art as science. Here are some tactics to help:

• ACKNOWLEDGE YOUR TEMPERAMENT

Even among CEOs, there’s a spectrum of risk-seeking to risk-avoiding personalities. “The perception is that CEOs, compared to

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