Risk Management

In today’s world, the true meaning of words often gets muddled in the noise of relentless marketing. However, within this narrative lies a transformative perspective on risk management, offering an alternate interpretation.

Allow me to unveil my personal approach to risk management. As a young, aspiring entrepreneur, I embarked on a journey of financial literacy at the age of 15. My intent in mentioning my age is to underscore a crucial principle: it is not about the sheer quantity of capital, but rather the art of focusing on percentages.

My ritual involved crafting monthly Excel spreadsheets, meticulously documenting income, expenditures, and most notably, the net accumulation. This net figure became my guiding star, steering me away from impulsive decisions driven by emotions.

Month by month, I meticulously tracked my net worth, my intellectual curiosity pushing me to continually outperform the previous month. This practice endures to this day.

The value of this objective standpoint in making financial decisions is immeasurable. Consider this scenario: At 18, a friend proposed a vacation, ready to commit without hesitation. He couldn’t fathom my reluctance, unaware of my intricate “risk management” process. Returning home, I analysed the past six months of Excel records, calculated the vacation’s cost as a percentage of my savings, revealing it to be a substantial 40%. I then made the decision to disappoint my friend, without much explaining I had to back out of this holiday.

This method remains my compass, whether evaluating promising business opportunities, enticing vacations or even purchasing gifts. There’s no room for default decisions; each one is made after a thorough review of my financial statements. If a venture costs less than 20% of my net accumulation from the past six months (a threshold I’ve grown comfortable with), I’m all in.

What’s the power in this approach?

It grants me an objective lens through which to make subjective choices, a priceless asset in the business world. To illustrate, if a holiday costs £5,000 and it’s less than 20% of my net worth from the last six months, I’ll spend it without hesitation, even tipping generously. Conversely, making the same decision with the same overall net-worth subjectively, can lead to stressful events such as hesitant to exchange ‘more than required’ hard earned capital never mind the thought of tipping, ultimately taking away from the break the mind deserves which diminishes the whole point of a vacation.

This approach empowers individuals, placing control firmly in their hands. Friends and family have definitely presented ideas that fall below the 20% net threshold, but my consideration hinges on the notion that I might not recover that money. This brought me more value than the losses as it filters out wishful thinkers, leaving room for serious, impactful ventures and meaningful relationships I may not have had the chance to be a part of otherwise without this systematic process, eliminating subjectivity we all apply when we judge someone.

I extend an invitation to the community to embrace this/relevant financial monitoring prospect. While we’ve crafted countless documents for others; cv’s, personal statements, power points, assignments and the list goes on…when was the last time you created a single piece of document for you and yours truly?

You’d be astonished at the boundless manifestations that can unfold simply by aiming to surpass the previous month’s achievements.