The Dragon Network: Inside Stories of the Most Successful Chinese Family Businesses

Chapter 9

Dealing with Risk

Risk refers to any negative and/or harmful consequences of an action or something that can happen. A risk consists of probability and severity. Probability is the chance that something negative or harmful can happen, while severity measures how devastating the impact would be if that something happens or if an action is taken. Nevertheless, every individual does not have the same attitude toward risk because it depends on perception. Perception can change from time to time, depending on someone’s understanding and experience. Someone who has a bad experience usually tends to avoid risk.

There are some people who are totally uncomfortable with risk; hence they try to avoid it at all costs. In contrast, there are also people who do not fear risk. They are ready to take risks and accept the consequences. For them, dealing with negative consequences creates its own challenges, which they enjoy. In between, there are some persons who are ready to take risks within certain limits, such as time limits. These kinds of people are ready to take risks but only temporarily. They cannot afford to take risks for a long period of time.

An individual or a group is also different regarding how much risk it is willing to accept before an action is considered necessary to reduce it. This is called risk appetite. The level of risk appetite will depend on the nature of the work undertaken and the objectives pursued. For example, when public safety is critical, risk appetite ...