o.d. to o.d.

Risky Business: Is It Such a Bad Thing?

No lessons in business or life are complete without a discussion of risk and risk management.

BY WALTER D. WEST, O.D., F.A.A.O.
Chief Optometric Editor

Risks are inherent in everything we do — every time we cross the street, climb behind the wheel of a car, run a business, etc. We can control and avoid-some risks, while we must deal with others.

Following Hurricane Katrina and most recently the floods in the Midwest, many of our colleagues fell victim to risks they either thought others managed or would never happen, as there was no historic precedent for the risk.

A discussion of risk evokes different emotions depending on how you approach risk as an individual. Also, differences exist in our risk tolerance: Some seek risk, some merely accept risk, others are risk neutral, and still others avoid risk at all cost.

Business risk and loss

When we address business risk, most of us think about the potential for the loss of the value of the practice or the loss of the practice itself. These losses can result from competition, mismanagement or financial issues, such as solvency or cash flow. Very few excellent business people, if any, ever consider the possibility of losing their practice to a hurricane or flood. Sure, you can reclaim or rebuild your damaged building; replace the inventory, equipment, furniture and fixtures (hopefully with insurance dollars), but, how do you replace the income you've lost during the rebuilding stage of a community? And, because natural disasters tend to displace those in a community, will the patients return once you reopen the practice? These factors begin to make us recognize that our practices are our true patients.

There's always some degree of risk involved with any purchase or investment. A proactive and conscientious approach to avoiding or minimizing risk can significantly enhance your business success, but this approach will never guarantee it.

When most people hear the word "risk," they tend to associate it with only bad things, and you may hear comments such as, "I don't want to own my own business. It's too risky. I could lose my money." The truth is, risks are both good and bad. In fact, in some instances in which you need to make a choice associated with risk, the outcome may be good in both instances, just better in one vs. the other. The risk you run in a decision of that type is whether you end up losing the potential to earn as opposed to losing altogether.

Risk strategy

Recognizing good risk from bad is a function of developing a risk management strategy that helps you differentiate between the two. This risk management strategy is the process of identifying what potentially negative outcomes could present and how you can manage them while not eliminating the potential opportunities that may exist.

Risk management in small business is a function of identifying potential opportunities that can advance or enhance your practice, and, at the same time, identifying circumstances or events that could negatively impact your practice by retarding growth, reducing the value of your practice or wiping out your practice altogether. It's important to recognize that despite having managed risk as well as possible, the potential for the unseen is always possible.

To our colleagues who continue to suffer after Katrina and most recently those in the Midwest following the late spring and early summer floods; I wish you all the best in your recovery efforts, the rebuilding, re-equipping, re-inventorying, refurnishing of your practices and of course the re-gathering of your patients. OM