The Market Is Booming So Is Now The Time To Take A Risk?

The Federal Reserve's announcement on pausing interest rate hikes, possibly reducing them next year, has injected a sense of optimism. Markets are accelerating, so is now the right time to embrace risk for growth?

If the recovery and soft landing are real, then not investing now could mean you fall behind those that do. But if it’s not, and we fall back into recession like some think we will, taking risks now could be fatal.

Our advice? Use a magic quadrant to identify the strategic risks you can take now and build on while still giving yourself room to pull back if the economic recovery is just a mirage.

Here’s how to use the quadrant:

Identify all the opportunities you would want to jump on if the economy was guaranteed to be strong for the next 2 - 3 years.

Map them on the 2x2 quadrant plotting their safety and return.

Don’t worry about hard math or metrics at first, use your gut and then move things around based on their relative performance against each other.

An initiative that would require a lot of financial investment or could pose other significant threats to your business if the economy slows (by distracting employees from essential tasks, for example) should be rated low on the safety scale and therefore appear to the left of the center line.

If that initiative has the potential to dramatically increase revenue, profit, or market share in a booming economy then it should also be plotted high on the return scale, and therefore be placed in the Strategic Quadrant.

But, if the potential returns are modest it should be ranked low on the return scale and would therefore fall into the Stay Away Quadrant and shelved for now.

Any opportunities that are high return and high safety fall into the Magic Quadrant, should be initiated immediately, and then monitored to ensure they are delivering as expected.

• If you don’t have the team, expertise, or bandwidth to move quickly, consider using consultants to get you started

Opportunities that are mapped into the Strategic Quadrant should be analyzed to see if there are ways to reduce the risk and move forward now.

• Can the risks be shared by forming joint ventures or partnerships?
• Can the risks be mitigated or backloaded so you have a chance to see where the economy is heading before fully committing?
• Can you use consultants and delay hiring or distracting employees until you know for sure where the economy and initiative are heading?

Remember that as the economy recovers, the returns of the opportunities that are mapped below the line today could improve and move them above the line tomorrow.

So continue to monitor, assess, and plot those opportunities and new ones so you can prioritize and initiate them when the risk and return profile looks good.

Good luck. And please don’t hesitate to reach out if we can help in any way.