Risk is loosely defined as the possibility of something bad happening. Unless one is actively looking for self-harm environments then we could imply that risk is the result of an unpredictable outcome. In the world of AI something is generally unpredictable when there is insufficient data to understand the event. To cater for missing data, and therefore poor predictability, we rely on people with experience or expertise. Businesses with experts at operational levels do just that….the experts deal with the unexpected.
So what about risk and reward;
I would like to suggest a universal truth that states that reward cannot exist without risk. A “nothing ventured, nothing gained” type statement. This principle seems to hold true when you consider the most basic of functions in nature like hunting or gathering food. It applies in social contexts equally where approaching a potential partner carries the risk of rejection but the potential reward of a soul mate. If the relationship between risk and reward is true, and somewhat proportional, then we could frame things slightly differently. At the moment we look at a reward as a target and then define the associated risks. A different framing would rather see us state a risk, and then ask what the reward would be. This approach sees risk as an opportunity versus something that must be avoided at all costs.
Businesses are characteristically risk averse. They are typically driven by a profit motive and look to achieve reward in the absence, or at least extreme limitation, of any risk.
An interesting perspective would be for a business to actively look for risk opportunities and then identify associated reward. For a bank the discussion could go like this….”A big risk for our business would be to disintermediate ourselves between the lenders and the borrowers”….”the reward would be that we own a trading platform to facilitate lender to borrower transactions”
Back to the start. Risk landscapes might well be the new business hunting grounds and our experts might be the most effective hunters.