Mastering Risk: Insights from Paul J. Sobel on Managing Uncertain Times
Mike interviews Paul J. Sobel.
Welcome back; we dive deep into risk management with the legendary Paul J. Sobel in this episode. Paul authorizes the game-changing book Managing Risk in Uncertain Times: Leveraging COSO’s New ERM Framework. Buckle up because this episode has insights that could transform how you approach risk in your business.
SUMMARY
We kicked things off by talking about the different levels of risk tolerance. It’s fascinating how personal and organizational risk appetites vary based on age, maturity, skill set, tools, and economic conditions. Remember 2007-2008? When the real estate market tanked, many fled the scene. But a few brave souls went all in. They saw opportunities where others saw disaster, and as a result, they emerged as multimillionaires. That’s the essence of high-risk, high-reward.
Paul shared a brilliant analogy involving Ryanair. The airline giant waits for Boeing to hit a rough patch before swooping in to buy planes at dirt-cheap prices. It’s all about timing. Successful risk management isn’t just about taking risks but knowing when to take them.
Paul broke down the mindset behind risk management. It varies based on the organization’s goals and maturity. For a small startup with venture capital funding, profit and loss might take a backseat to liquidity. The key is demonstrating to investors that they can turn the corner and become cash-flow positive.
But what about more established companies? Paul highlighted how the board of directors and senior management must constantly evaluate long-term objectives. They must ask tough questions like, “How will emerging technologies like AI disrupt our industry?” or “Are our current strategies sustainable?”
A big takeaway from our conversation was the importance of information in risk management. Boards and senior management need detailed information to make informed decisions. It’s not just about data—it’s about transforming data into actionable insights. This involves modelling and forecasting different scenarios, even when dealing with uncertainty.
Paul stressed that while senior management is usually in the thick of it, the board must have enough information to challenge decisions. This dynamic ensures that all perspectives are considered and risks are thoroughly evaluated. It’s a balancing act of relying on data and trusting your gut.
One intriguing topic we explored was the so-called “risk gene.” Why are some people more willing to take risks than others? Paul admitted this is a complex issue, but it often concerns individual psychology and organizational culture. At companies like Georgia-Pacific, the culture encourages taking calculated risks to meet high expectations.
Interestingly, game theory also plays a role. Everyone has a threshold for risk. For some, a million-dollar bet might be too much to stomach, even if the odds are in their favour. It’s about understanding your risk tolerance and making decisions that align with your long-term goals.
We all know the term “analysis paralysis.” Having too much information can actually hinder decision-making. Paul shared that it’s crucial to balance analysis and action. Sometimes, you just have to make a decision and move forward.
He used the Clifton StrengthsFinder as an example. This tool identifies your natural talents and inclinations. Paul’s analytical tendencies were a strength, but they could also lead to overthinking. The key is recognizing these tendencies and making timely decisions, especially in a fast-paced business environment.
In today’s world, rapid change and increased complexity are the norms. Technology is advancing at breakneck speeds, and businesses must adapt or risk being left behind. Paul emphasized the importance of staying informed and being agile. This means leveraging technology, understanding market trends, and continuously scanning the environment for potential disruptions.
Paul’s advice is clear: No single person can handle it all. Successful risk management requires a team effort. Divide and conquer—assign team members to monitor different areas and report back with insights. This way, you can stay ahead of the curve and make proactive decisions.
Risk management isn’t just about avoiding pitfalls but also about seizing opportunities. It’s about understanding yourself, your business, and your world. With the right mindset, tools, and strategies, you can navigate uncertain times and succeed.
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About Mike Fallat
Mike Fallat, aka The BookMan, is the owner of Dreamstarters Publishing and the Million Dollar Book Agency. They have helped 300+ entrepreneurs become bestselling authors. His goal is to help 1,000 entrepreneurs publish books and teach them how to use their books as a gateway to generating 7-figures.
Visit website for more information: https://www.milliondollarbookagency.com/
About Dreamstarters Publishing
Dreamstarters Publishing offers ghostwriting, cover design, and everything that is required to take an idea to a finished book (kindle, paperback, hardcover, and audiobook).
The Million Dollar Book Agency is the ultimate marketing CRM system for author-preneurs. Services include automated funnels, lead generation campaigns, book fulfillment, podcast management, press releases, virtual assistants, course development, and more.
Mike also hosts a podcast known as Million Dollar Stories and runs a membership-based site known as Million Dollar Circle. In addition to owning the book business, he invests in self storage real estate.
https://dreamstarterspublishing.com/