How to Overcome Risk Aversion and the Downfalls of Inaction – by Mike Chapman

In volatile situations, we often want to sit back and watch. Observing before we act makes us feel more confident about whatever decision we end up making. Yet, this delay perpetuates inaction, and waiting around doesn’t necessarily mean you’ll end up making a better decision – or the right decision – if you end up making a decision at all. Sometimes, it means you’ll miss the boat altogether.

Russell Ackoff spoke for many years about doing and not doing, showing that there are two possible types of decision-making mistakes, which are not equally easy to identify.

  • Errors of commission: doing something that should not have been done
  • Errors of omission: not doing something that should have been done

By not deciding at all, we often think we’re insulating ourselves and our businesses from risk. Unfortunately, inaction sometimes puts us at greater risk. I wanted to share my thoughts on action vs. inaction and how you can overcome risk aversion to boost your success. Let’s go!

Why the Risk of Inaction is Greater than Action?

Generally, people decide to take on risk based on the potential reward that they could gain. However, because people tend to be more critical of failure than praising of success, we’ve cultivated a society that would rather risk nothing and gain nothing than make a smart risk and earn themselves a calculated reward.

During the start of COVID-19 in March 2020, the dilemma of action vs. inaction hit companies hard. Companies were forced to change their business models overnight if they wanted to survive. Think of all your favourite stores that instantly went online or started offering new products like masks or hand sanitiser.

Their success was due to quick action and innovation during quarantine periods and lockdowns. Their thought? If consumers couldn’t come to them, they would simply go to the consumers. While they were in a world of unknowns, they took a calculated risk.

Unfortunately, not every company did this. There were plenty who waited to see whether the pandemic would be over in just a few weeks’ time, and they suffered financially because of it. The desire to sit back and watch – to choose inaction over action – made them less agile in today’s volatile global economy.

So, if you’re a business owner, do yourself a favour and cast off the option of inaction. It’s one of the least obvious risks of doing business, but it very much exists. Inaction is common because…

  • A business may have limited resources, and they feel it is better to be safe than risk losing what they have.
  • A business may procrastinate decision-making and waste time, which increases the risk of failure.
  • A business may face bureaucracy, which slows the process of decision-making down and makes quick and decisive action more difficult.
  • A business may face an obstacle and be unsure of how to proceed, so instead of making the wrong decision, they do not decide at all.
  • A business may be worried they will fail, and failure is seen as the worst outcome of all.

Unfortunately, all of these scenarios show businesses hesitating (even for valid reasons) and choosing inaction rather than finding ways to act despite their obstacles. Yet, what’s crucial to remember is that ideas on their own hold little value; it’s the action around that idea that counts. Once you start taking the steps toward your goal, you’ll find it that much easier to continue.


  • Allows you to gain and keep momentum
  • Helps you overcome your fear
  • Gives learning and validation
  • Keeps you focused on the present
  • Eliminates distractions
  • Facilitates your sense of accomplishment

Why Innovation is Essential (Don’t Let Risk Aversion Stop You!)

Believe it or not, one obstacle that contributes to inaction is experience. When you have ample experience in a field, it makes you feel confident that you know what’s coming next. It makes you think that you can predict the future based on your past experience. Well, news flash, no one knows what’s coming next.

It doesn’t matter how much experience you have in a field – you’ll never be able to predict the future. This is why Eric Ries developed an equation to help fight against the “experience” bias. He calls it “Innovation Accounting.” It’s a method that helps you evaluate progress when all metrics typically used in an established company (revenue, customers, ROI, market share, etc.) are effectively zero. It provides a framework of chained leading indicators, which predict success. This method helps keep teams focused on the most important assumptions that they’ve made about their project.

If that’s a little technical for you, think about innovation accounting as a way to test your assumptions before you make a decision. Organizations that fail to do this are the ones who make the most mistakes. Here’s a scenario to show you how innovation accounting works:

There was a decision to roll out green bins in Bendigo. In this case, the assumption is that people will use the green waste bins for their food scraps. Here is how that assumption can be tested using the innovation accounting framework.

  • Build: Select a group of 50 random houses. Give each house a green bin with instructions.
  • Measure: Pick up the bins after 2 weeks. Measure what percentage of the bins had food scraps in them.
  • Learn: Determine which percentage of bins did not contain food scraps. Contact those houses to find out why.

This process of innovation accounting is different than a trial because it’s aimed at testing an assumption. It’s not seeing whether or not the program itself is valid or effective. When you have data like this, you’re able to evaluate it and make a decision. It may tell you that people don’t like having an additional bin at their house or that it’s too easy to forget about. It does not rely on past experience to inform future decision-making but rather gathers data from a real-world experiment that can give you relevant information as you consider your next step.

Based on this scenario, do you see how this type of innovation accounting would make you more comfortable with taking a calculated risk? Sometimes, it pays to ignore your prior experience and act based on the present information.

Overcoming Risk Aversion

Everyone has an innate risk tolerance. Some individuals battle this risk tolerance their entire lives. They have to make the active choice to walk away from the poker table or to make responsible decisions while out with friends. Others have no problem avoiding risk – they can’t imagine doing anything remotely uncertain. The prospect of making a precarious decision causes immense anxiety, and fear of the unknown is enough to keep them from doing anything at all.

If you fall into the latter category (and favour safety and inaction over the possibility of risk), there are some ways that you can overcome your risk aversion. Practicing these actions can help you become more comfortable with difficult situations and balance your emotions with logic.

  1. Start with small decisions

You don’t have to jump into risk-taking with a huge decision. Instead, consider a business decision that is small but out of your comfort zone. A decision you’ve been hesitant to make because you’re not sure of the outcome, but that wouldn’t put your company in any real danger. ‘Safe to Fail’ experiments will let you approach an issue or a new idea safely and will allow emerging possibilities to become observable.

Be thoughtful and strategic and move forward and see where your decision lands you. Testing and experimenting with risk will often give you an idea of how you make decisions under pressure and how you can navigate your risk tolerance. Starting small provides the opportunity for practice, so you can start to feel confident before you need to take larger risks.

  1. Imagine the worst-case scenario

Sometimes we sit in fear and we’re unable to move forward…but for what? Ask yourself, “What is the worst that can happen?”

If you’ve ever stopped and thought about the disastrous outcome that you’re attempting to avoid, it’s often nothing that we can’t face or find a solution for. The thought of failure is often the worst part. It’s everyone knowing you didn’t succeed at your goal.

So, in the end, it’s not the actual outcome that terrifies you; it’s the thought of not succeeding. The good news is that the more you have thought about that worst-case scenario, the more likely you will be willing to face it. Face the reality of failure and become more risk-tolerant.

  1. Develop a portfolio of options

Risks are scary if you have limited options. If you’re making a business decision with only one good option, then it makes sense that you’re nervous about the ultimate outcome. Instead, make your bet with numerous possibilities for success. This way, you’re not so afraid that you’ll end up with nothing.

  1. Be okay with the unknown

Some people avoid risk because you have to be mentally okay with not knowing what will happen for a certain amount of time. If you’re someone who hates ambiguity, this can be difficult to manage. It takes courage not to know exactly what the future holds. Practice this psychological skill by engaging in risks more often. If you’re used to having to commit to a path without knowing the end, you’ll ultimately handle the obstacles along the way much better.

  1. Stop equating risk-taking with gambling

When businesses think about risk-taking, it sometimes incorrectly gets equated to gambling. Yet, these decisions you’re making should still be thoughtful, measured, and analysed. You shouldn’t be gambling based on hunches or theories.

When you recognize the difference between risk-taking and gambling, you realize that risk-taking is calculated. It’s carefully considered and then acted upon. This should give you confidence that you’re not just placing a bet and then living with the consequences. You’re carefully thinking through what you want for your business and then moving forward with that decision (even if the outcome is unknown). 

  1. Don’t always look at the endgame

People always look at the endgame – the ultimate goal. That’s their focus because that’s what they eventually want. Yet, they end up petrifying themselves into not making any decisions and not taking any risks.

The truth is that the hardest part of any project or any path is often that very first step. It’s the starting line – not the finish line – that you have to keep in mind. To make it easier on yourself, break those decisions and risks down, so it doesn’t feel like such a hurdle. Make it easier to start by making the first step as small as possible. Once you’re feeling productive, it’ll be easier to continue taking action.

  1. Avoid “perfect” as your goal

Some people never achieve their goals because they’re striving for perfection. Authors never publish books because they don’t think it’s perfect. Educators never allow their online courses to go live because they always think they can do better. Chefs never serve a good dish because they believe they can improve. While perfectionism is in all of us, don’t let that hold you back from taking risks or making decisions.

If the perfectionist in you is saying that you can’t start or finish a project until the conditions are perfect, then change “perfect” to “good enough.” If you can’t make a decision until “this happens” or “that happens” re-evaluate your criteria. Will anything ever be perfect? Or will it just be “good enough”?

If you’re in a decent spot to make a decision – to go for what you want to go for – then don’t let anything hold you back. You must have the courage to make decisions even with imperfect information. You can always course-correct along the way as additional information becomes available (and you will become really great at doing so!). You’ll never know everything…and it’s pointless to wait until you think you will.

Final Thoughts

If you’re willing and bold enough to act, then there’s almost always some action available to you. If you fail to act at all, you’ll be left with no actions and no options. So, take a moment to reflect on the following question:

  •     Do you find yourself to be risk-averse?
  •     What prevents you from acting in certain situations?
  •     What do you fear most in those situations?
  •     What do you stand to lose by action?
  •     Will you lose more by action than inaction?

In most situations, we stand in the way of our own success. If you’re naturally risk-averse, nurture your ability to take calculated risks. You’ll ultimately perform better in difficult situations if you have some practice under your belt.

Now roll up your sleeves and have a fantastic 2021.

Mike Chapman

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About Mike Chapman

Mike is a start-up consultant who works with new and established businesses helping them launch new products and initiatives and securing seed and growth funding. He founded Europe’s leading DVD Archiving Solutions provider at the age of 27. He also co-founded AGS Support, the UK’s largest staffing provider to the Supported Housing sector, and Builders Bay, an online marketplace for surplus building and DIY products, and winner of the Start-Up Series, the largest seed funding competition in the UK.