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Reward vs Risk

 When developing a strategy, there are 2 opposing concepts that must be balanced - Risk and Reward. There are two known philosophies to take into account when determining the methodologies:

  • “The best offense is a good defense”. 
  • “The best defense is a good offense”

Understanding these 2 philosophies and when each is appropriate, is a key factor in determining a plan of action.

Generally speaking, risk and reward are proportionate - the greater risk a person is willing to take (potential loss), the higher the potential for reward. For example, there are different bets you can make at a roulette wheel. If you have $1000 to gamble and pick a specific number to bet it on, you have the opportunity to win $35,000, whereas if you pick red/black you only have the opportunity of winning $1,000. In both cases, the odds are that you are going to lose, but the risk is much greater when choosing a specific number.

When choosing an objective, you have to understand what you want to accomplish, but more importantly, why and what are the ramifications of succeeding. Everyone theoretically wants a promotion, but may have not considered the new responsibilities that come with the new position. It may include sitting in countless meetings, spending more time at work or being required to travel very often. That doesn’t mean it’s not worth it, just that there are ramifications to succeeding and you have to decide that you want it. There are numerous rewards and risks in a business environment. They may include gains and losses of time, money, reputation, relationships and even your job. Once you fully understand what you get if you succeed, the next step is to understand what are the risks if you don’t. Make a list. On one side put the expected rewards of succeeding and on the other side put the risks involved in getting there or of complete failure.

The best offense is a good defense. When using this strategic philosophy, the first thing you want to take into account are the risks. Be super conservative, check and double check everything. This will greatly increase your cost and the time it takes to accomplish the project. Make sure that every risk is fully reviewed and mitigated. Your odds of success are very high, but there is also a huge cost involved in getting there. This philosophy assumes that if any of the risks materialize, it is a much greater cost than the rewards that success will bring.

The best defense is a good offense. When using this strategic philosophy, you are totally focused on the reward of success. You accept that some of the risks will materialize and that you will be able to overcome them. You cut corners and walk on the edge of what is considered acceptable and move as fast as possible with the minimum amount of overhead. You may lose some deals, and incur some penalties, but the total reward of success makes that into an acceptable loss. This philosophy assumes that the risks are negligible when compared with the reward potential, and should not be taken into account when developing your strategy.

Life is generally not as cut and dry as those philosophies will have you believe. There should always be a healthy mix of offense and defense in order to succeed. When looking at your list of rewards and risks, try to categorize them. Which rewards are you not willing to compromise on, no matter what, and which risks are considered acceptable? What are the ramifications of failure, and how much are you willing to risk in order to ensure that this doesn’t happen?  Building a strategy that includes both offensive and defensive aspects will enable you to succeed without being reckless.


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