Risk vs. Reward (Part 3 – last one!)
At 20, I started working for a software company that implemented ERP solutions.
I was a post-sales financial consultant, but I think that now my title would be “business analyst”. I had to understand the client’s processes and help my colleagues in IT to modify our software application to better respond to the client’s processes.
And my colleagues, both those from IT and from sales, tried to convince me to make the client change their processes to suit the application.
Yes, they tried. But they didn’t succeed with me, because, even then, I hated generic solutions, where the application / software was more important, and not the client.
Now, many years later, I am a nightmare for consultants, advisors and others who try to sell on-the-shelf solutions to me.
I think every business deserves its own solutions and not everything applies in the same way to everyone.
In the first post of the “Risk vs. Reward”, I was saying that in some business models, the reward for the risk of fraud is non-existent, so, in general, the risk appetite is very small and then decisions are taken to reduce the risk of fraud.
But a risk of fraud can be accepted if it brings a greater reward than the anticipated impact of the risk.
I once read in Hopkin (“Fundamentals of Risk Management”) a case study in which, in a street food business, the owner decided to give up the activity of cashing money, in order to speed up the sale process. He placed a cash box at the queue exit and let the customers pay for the purchased products themselves, without a cashier.
The businessman monitored his process and apparently came to the conclusion that people were trustworthy and paid for the products they bought.
In this situation:
💡 Risk of fraud. The businessowner accepted the risk of fraud and had a greater appetite for risk.
💡 Control. He decided not to put controls in place, in line with his risk appetite, and installed a collection box instead of hiring a cashier.
💡 Reward. Bigger sales because the process was faster.
It is also possible that the customers bought more from him because, in general, we, people, like to be trusted and we reward this trust.
Posted initially on LinkedIn: Claudia Craia
