Risk aversion and the consequence of it in the corporate world

Corporate can also chicken out:

Scholarly articles across the internet talk about big gigantic corporate getting out of a situation which they could have stuck to and it could have well nigh been their call to success. A lot of opportunities that are lost out to the corporate to make it big are those that are fraught with risks.

The threat is real of course, but the point I am trying to draw home is that while one cannot in any circumstance eliminate risk per se from the scene, what can be done however is risks can be identified even before they come close and the risk can be assessed and strategies could be drawn up so that they are not so intimidating the way they look like.

Sometimes, risk aversion is also regarded as an aversion to change:

Megan McArdle in his brilliant essay on “Why Companies Fail” in the Atlantic on the General Motors speaks vehemently on the subject as to how big organizations like the GM itself become dysfunctional over a short period of time due to a corporate culture which is staunchly resistant to changes in it. The aversion to change with the times is what can cause difficulty in changing the course of the organization even if the knowledge of an imminent doom is obviously staring right into their faces.

He argues subsequently that if the corporation had not been risk-averse as such it could have avoided the downfall that came to it. He also cites various other instances to substantiate his points with actual case studies that he has undertaken on the subject himself.

The author goes on to say that risk may be appreciated in a particular context only as it is too complicated a term to be generalized across the industries. This makes a lot of sense since what can be termed as a risk for a particular industry can be an opportunity for another company in an adjacent industry. In that sense risk is subjective.

Risk aversion can also in a similar vein be subjective and vary from person to person from time to time. When a person is a risk-averse it may mean that he is genuinely scared that in a bid to earn a little more he may even lose out on what he is holding and therefore choose to be content with a bird in his hand rather than two in a bush and none in his hand at all.

The risk in an industry needs to be comprehensively studied and understood to be able to tackle it head on and also not led into the state that GM went into.