Let’s be honest... risk is a loaded word. For leaders, it can mean the difference between launching something that transforms your organization—or something that sends you back to square one. But here’s the thing: not all risks are created equal. The real leadership magic happens when you learn to separate the good ones from the bad.

In today’s complex business world, playing it safe can be the riskiest move of all.

Think of it like this: good risk has purpose, preparation, and a possible reward worth chasing. Bad risk? That’s often driven by emotion, ego, or a failure to see the full picture.

“The essence of strategy is choosing what not to do.”
— Michael Porter, Harvard Business School

Porter’s point is crystal clear. Good leaders don’t just say yes to opportunity—they say no to the wrong ones. And that means evaluating risk with clarity, not just courage.

This is top of mind for me right now because I took a calculated risk a year ago and invested around $60,000 in a product I thought would be a differentiator for my business. I did my research and believed it was the right thing to do.  At the time, I had the finances to do it. The third-party company we were working with ran into problems and wasn’t able to stay on the original timeline and that meant I wasn’t able to generate the expected revenue, I thought it could bring in.  Now the world has changed.  My company’s finances are challenged by external uncontrollable forces, and I’m faced with a tough decision.  Do I pull the plug now and stop investing or do I continue to funnel money into something that may or may not work?  I’m going to walk you through my decision-making process throughout the rest of this blog. 

3 Ways to Spot a Good Risk

1. It Aligns with Your Core Mission 

Check! The financial risk I made is exactly aligned with my core mission.  If a new opportunity or direction supports your bigger vision, it’s likely worth exploring. A good risk pulls you toward your purpose—not away from it.

Harvard Business Review says that successful organizations “anchor decision-making in a clear understanding of what they do best and what matters most.”
— HBR, “Don’t Let Uncertainty Paralyze You,” 

2. It’s Informed, Not Impulsive

Before you leap, you learn. Good risk is backed by data, insight, and conversations. Yep, I did all of those things too.  Now, here’s where I think I fell short. I didn’t look at the downsides and make a plan for them. I didn’t take into consideration that timelines could be missed and that the economic circumstances would change so dramatically in just one year. I was so confident things would work out; I failed to plan for failure.  I won’t do that again.

3.  You Can Survive the Worst-Case Scenario

No risk is 100% safe. But ask yourself: If this doesn’t go as planned, can we recover? If the answer is yes, you’ve probably found a risk worth taking.  That’s where I’m at now.  I am able to survive the risk I took and recover.  The tricky part is knowing the right time to bail. 

Warning Signs of a Bad Risk

• It’s fueled by FOMO (fear of missing out) or peer pressure
  
• It contradicts your core values
  
• It lacks clear next steps or contingency plans
  
• You're relying on hope instead of a strategy
  

And here’s a big one: If you're afraid to question it, it's probably worth questioning.

“Take calculated risks. That is quite different from being rash.”
— George S. Patton WWII U-S Army Officer

I absolutely saw my risk as calculated and still do.  Knowing what I know now, would I do it again?  Probably not but none of us have a crystal ball that allows us to see into the future.  We can’t always play it safe.  We need to take the courage to try innovative new things and then we need to carefully evaluate, without emotion, the path for moving forward.

Risk-Taking Isn’t Optional—It’s a Leadership Requirement

Whether you’re launching a new product, hiring a bold personality, or investing in new tech, risk is built into the job description. But the best leaders…have a little Kenny Rogers in them.

 “You got to know when to hold 'em

Know when to fold 'em

Know when to walk away

And know when to run.” 

Those lyrics from his song The Gambler are great advice for every leader.

Asking better questions can lead to better risk taking.

• What’s the upside?
• What could go wrong—and how would we respond?
• Who else has done this, and what can we learn from them?

You don’t need certainty—you need clarity.

Risk Is Not the Enemy

Fear of risk keeps too many great ideas locked in the “someday” file. Your role, as a leader, isn’t just to avoid danger. It’s to chart a smart path forward—even when the road looks uncertain.

Let’s face it: No one ever changed the world by playing it totally safe.

“Only those who will risk going too far can possibly find out how far one can go.”
— T.S. Eliot poet/playwright

Would I make my $60,000 risk again?  Probably not, but I will continue to take risks.  We can’t let the fear of risk hold us hostage because that could make us obsolete.  I’ll keep analyzing risk and work even harder to make my next risk a better one.  So go ahead. Be bold. But be wise. The difference between a good and bad risk? It’s not just the outcome. It’s the thinking behind it.