Learning how to deal with uncertainty in business is one of the toughest parts of the job. Not only is it important to have a strong grasp on the current market, but knowing how to navigate uncertainty is also essential to evolving with an ever-changing market, legal circumstances, demographic changes, and more.
So, how do business leaders develop this skill? Is it only something that comes with experience?
Not necessarily. Even in terms of downtime and recreation, people enjoy the concept of uncertainty. For example, games like roulette have remained popular for centuries because they challenge players to hedge their bets—literally. Players only have the choice to place a bet on certain numbers, groups of numbers, or colors.
There are no guarantees in the game—which is why it’s so much fun, whether played online or in person. Using only their analytical skills and strategic leanings, players must figure out how to come out ahead. But nobody knows how the roulette ball will land when the wheel stops spinning.
The same notion is true in business. No matter how prepared an entrepreneur is and how much experience they have, an ever-changing world is just as unpredictable as a spinning roulette wheel. Here’s how the best businesspeople in the world deal with uncertainty when it comes to finance.
Know the Difference Between Risk & Uncertainty
Risk and uncertainty are easy to clump together, but they’re very distinct. Risk is something that can be measured. It can be identified in a financial market and then dissected and broken down into manageable pieces. In other words, risk is usually addressed in robust financial planning.
It can be observed, quantified, and then worked around. But uncertainty can’t. Uncertainty is a less familiar beast. Something like inflation is more concretely categorized as uncertainty rather than risk because the driving factors behind it are less easy to predict, along with the response from federal bodies.
Knowing the difference between these two helps you have a more realistic understanding of what types of obstacles you’re facing in a financial sense.
Focus on What You Can Control
That brings us to the next point—the best businesspeople in the world have a strong hold on what they can control. They also know what’s beyond their control. This harkens back to the distinction between risk and uncertainty: risk is something that can be mediated, while uncertainty can’t.
The idea is that by focusing on that which is in your control, you can cultivate a stronger understanding and mindset when tackling challenges. The focus is on a sense of empowerment and even self-leadership. By contrast, wasting energy on circumstances outside your control can yield wasted resources and manpower.
Plan Ahead—Multiple Times
Financial planning is a hugely important aspect of dealing with financial uncertainty. Businesses that have a more elaborate and comprehensive financial plan stand a stronger chance at success in the future. But that usually means creating more than one financial plan.
Financial plans should be dynamic, and able to respond to shifting markets or even disasters. Planning too far ahead might prove to be a waste of energy further down the line, so many analysts and entrepreneurs suggest crafting more dynamic plans for a shorter-term future—without losing track of long-term goals, of course.
Understand Emotional States
This element harkens back to the game of roulette. Part of the reason the game is so popular is its element of chance—but one thing that players must excel at aside from financial planning is their emotional state. When emotions take hold, all common sense goes out the window—along with the core tenets of dealing with financial uncertainty.
In other words, the market isn’t an emotional space, which means business leaders should go to great lengths to understand their emotional world and mitigate its negative impact on their professional lives. Without this ability, entrepreneurs might not understand what’s motivating their decisions while on the clock.
