The key to managing risk lies in paying attention to both the big picture and the small picture. Here are five basic ways I've learned MANAGE AND MITIGATE the dangers.

1. Be prepared and in a basic position

As a high school football player, I learned that you must always be prepared for anything and in the “ready position” on defense. We also called this the “basic position”, which was having both feet firmly on the ground shoulder width apart, legs slightly bent and ready to spring into action in any direction, having both arms hanging straight down, hands slightly above knees, ready to throw a block or make a tackle, and head up and eyes alert.

Being prepared helped me when I got the biggest one business risk of my life and started my company. Over eighteen years, I worked in five different cities for four companies with six different bosses. I made many mistakes and learned many lessons. From all this effort and experience, I had become competent in my field and I was convinced that I could make this business successful. Without this competence and confidence, I would never have been able to take the risk that led to the success of my business.

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2. Diversification

The theory is that different asset classes (eg bonds, stocks, real estate, oil and gas) are not correlated and move in different directions at different times. Diversification can be applied to every aspect of your life. By having more diversity and balance in your life, you are less dependent on anything and are in a better position to cope with any loss.

Early in my career, right after my wife and I started raising our family, I realized that I could only have time for three priorities: family, business, and health. There was no way I could sacrifice any of them. I have never missed any of my boys' games, shows or performances important activities. With few exceptions, I coached their teams and was home every night for family dinner. Usually, I worked on Saturday mornings, but on weekdays, no later than 6:30pm I wasn't in the office until midnight or out entertaining clients, and I also found time to exercise to keep my energy and sanity up .

3. Ripcord

In business, the best risk managers have an exit plan for every significant risk they take. At Amazon, the fastest growing company in the world, they call it the “double door.” They mean that for every door they go through (risks they take), they need the ability to turn around and get out. They take many big risks but always have an exit plan to mitigate or limit their losses. Then, they do their best to make it work.

At Trammell Crow Residential in the 1980s, we pursued a similar strategy called “ripcord.” For every investment we've made, we've negotiated one exit strategy. If the deal went bad, we made sure we had a “ripcord” we could pull to minimize our losses and parachute to safety. Real estate developers who did not practice this principle became “victims” of the recession.

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4. Alignment

General George S. Patton once said, “Take calculated risks. That's quite different from being rash.” One of the least talked about risk management principles (which I didn't really learn until late in my career) is the power of alignment. By alignment, I mean that your values ​​and goals align with the people you associate with in your business and personal life.

Our values ​​in the home building business were clear: quality, customer service and profits, so the alignment with our trade was usually quite good. But aligning philanthropy and investing in new ventures becomes much more complicated. As they say, the Japanese translation of “joint venture” is “same bed, different dreams,” so it's important to have the same dreams as your partner. I've learned that you can take risks with the markets, but not with people. Dealing with people with integrity is essential.

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5. Balance

This is a physical principle that can be applied to business and life. The main idea is balance in both fields. In other words, how do you get back to balance, or equilibrium, if things get a little unstable or out of control?

One way to stay in stable balance is to do business and have relationships with people you know and trust. We can all interact with friends, enemies, or strangers, but if we choose not to interact with friends and people we trust, we depend on enemies or strangers, essentially a precarious balance.

We can avoid unnecessary risks and are much safer in a stable equilibrium position. So don't put yourself in a vulnerable position in a business or personal relationship where a small tremor can create a life-changing disaster.

In conclusion, you can't go through life without taking risks, so be the person who tries, takes smart risks and gives it your all. And when you lose, as you will sometimes, get right back up and into the arena. This is a life without regrets and a life worth living.