Risk on – Game on?

Being the start of the year it is a good time to think about goals… and it is also a good time to think about your sales pipeline too.

One of the things that have always struck me, in the culture of business development, is how this changes across the world. Different markets seem to take different approaches.

Compare, for example, the differences between the UK and the USA.

In the UK, we would pride ourselves on saying how we “run a tight ship” and really make sure, to a good level of comfort, there is an understanding of the return on any money we spend.

If you have ever had to justify precisely the value of a particular activity, and then make sure you can track it…. before you spend any money… then we are on the same page.

Prudent, pragmatic, somewhat cautious and risk-averse.

Whereas in the US, everything seemed a little more… well swashbuckling. This is nicely summed up by the phrase, “you have to spend money to make money”… a greater readiness to invest and spend money… trusted to get a return and make it work… albeit if you didn’t… then well not great!

Expansive, less cautious and comfortable with more risk.

Future Investing

This approach to investment can also be seen in the stock market.

Do you invest in a market sector, or individual company, trusting in your belief of higher returns, knowing full well these returns may not happen…. or stick the money in cash, your savings, guaranteeing a lower, but safe return?

And, if there is a market downturn, then what do you do? Invest more or be ever more cautious, to keep your hard-earned money safe?

Of course, investing strategy, does, in the end, depend on your personal situation and risk appetite and I would not want to offer investment advice here (…. you should speak to your financial advisor…. etc etc ).

However, at a macro level, this psychology of investing is interesting and maybe offers a lesson for us in business growth and investment.

Risk On – Risk Off

Using investment parlance, these market environments are also known as Risk On or Risk Off.

If the market is buoyant, people are happy to invest, believing their assets will grow, with a good return… it is a Risk On.

When the economy looks grim, investor sentiment becomes subdued, people don’t want to invest fearing the stock market will fall further and it is Risk Off.

Countercyclical returns

In an economic downturn, with everyone hesitating, and being cautious, prices are low, change happens slowly.

Yet, this is precisely when investing in the right places can result in outsized returns, especially once the sentiment changes… if you can go against the grain and not follow the crowd, but accept the extra risk.

Back to Business

So what does this mean for us… we are currently entering a period of economic downturn, by most accounts.

So is it time for us to pause investment, roll down the shutters and wait for the storm to pass… or is it time to invest and make progress whilst everyone else is doing precisely that?

Now, I know going countercyclical is hard… really hard in fact… but, what are we going to be this year?….

Careful and Risk off accepting slow growth, or cautiously expansive and Risk on, looking for outsize progress, process change and returns longer-term?… it is making me think.

Have a good week everyone

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