Changing with confidence: are businesses too risk-averse?

Professor Serkan Ceylan at Arden University looks at the cost of ‘playing it safe’ and explores how businesses can reframe risk in an era where change is two-fold

 

Many businesses remain overly risk-averse, prioritising stability over opportunity. But while caution has its place, an excessive fear of risk can stifle innovation and slow decision-making, leaving businesses vulnerable to disruption. To thrive in today’s dynamic landscape, leaders must cultivate a mindset that sees change as an opportunity, rather than a threat.

 

 

Why do we play it safe?

Businesses, by nature, are designed to generate profit and ensure long-term sustainability – and risk aversion often stems from the desire to protect these goals.

 

However, this can see senior leaders actively avoiding uncertainty and potential losses, even if it means forgoing opportunities for higher rewards. Obviously, this isn’t the case for everyone, given the fact that there are big risk takers and eccentric business leaders who have made their mark by challenging the status quo.

 

But we’re often drawn to a more cautious approach simply because our brains are wired to ‘fear’ change – or at least be apprehensive about it. According to 20 years of research conducted by Columbia University’s Tory Higgins, some of us are risk-averse, not because we are neurotic, paranoid or even lacking in self-confidence, but “because we tend to see our goals as opportunities to maintain the status quo and keep things running smoothly”.

 

In business terms, this means there’s a common fear of financial instability, damage to reputation or the inability to recover from a failed venture. And for many organisations, the stakes are high: jobs, investments and customer trust are all on the line. As a result, the top decision makers may prioritise proven strategies, incremental growth and predictable outcomes over bold, untested ideas. This can manifest in various ways, such as sticking to traditional markets, avoiding disruptive innovations or hesitating to invest in emerging technologies.

 

 

Excessive caution can lead to stagnation

While this approach can provide stability, it can also lead to stagnation, and in a rapidly evolving business landscape and tumultuous economy, overly cautious companies may struggle to adapt to changing consumer demands or competitive pressures.

 

For instance, businesses that resisted digital transformation in the early 2000s found themselves at a disadvantage as industries shifted online. Even though Topshop has recently made a comeback announcing its return to UK high streets, it’s still a fine example of how initially playing it safe and being slow to change meant missing out on opportunities to lead, innovate or capture new markets – resulting in its sale and the closure of all physical stores.

 

Over a decade, only about one in ten companies climb from the middle to the top of the ‘power curve’ (in terms of economic profit). Those that do make a handful of bold, focused moves, not following incrementalism. And CEOs themselves see the danger: nearly 45% say their companies won’t be viable in ten years if they stay on the current path, especially if they keep playing defence. That figure rose in 2024 and remained a prominent theme in 2025.

 

However, risk aversion isn’t inherently negative. It’s often a calculated response to uncertainty, especially in industries where margins are thin or regulations are strict. The key is finding a balance, understanding when to take a leap and when to hold back. Businesses that embrace a measured approach to risk can mitigate potential downsides while still pursuing growth.

 

Ultimately, the challenge lies in recognising that some level of risk is necessary for progress and that playing it safe, while comforting, may not always be the safest choice in the long run.

 

 

Reframing risk when change is two-fold

Two significant shifts are occurring simultaneously: the accelerating pace of disruption, driven by forces like AI, climate change and geopolitical tensions; and a changing mix of risks, transitioning from primarily operational and compliance concerns to more strategic and market-driven bets.

 

To navigate this evolving market, reframing risk is essential, and there are practical strategies at hand that will help businesses shift from a defensive to a growth-oriented mindset.

 

Right now, leaders face a double challenge: not only is the pace of change accelerating, but the type of risks businesses face has also broadened. Many organisations still treat all risks the same, focusing on strict controls that prevent mistakes. But research shows that only some risks should be minimised this way (like compliance, safety or cyber threats). Others, such as strategic bets on new markets or innovative products, require taking calculated risks to grow.

 

The key is to separate risks into categories: protect against the preventable, build resilience against external shocks and lean into strategic risks where the upside justifies experimentation. By shifting the mindset from ‘risk equals danger’ to ‘risk equals potential reward’, leaders can turn uncertainty into an advantage.

 

For instance, instead of averaging risks, businesses can segment them using Kaplan–Mikes’ three-bucket framework: preventable, strategic and external. Preventable risks, which stem from internal failures, demand strict controls; strategic risks, tied to growth opportunities, require informed risk-taking rather than a zero-tolerance approach; and external risks, such as those from global disruptions, call for resilience and adaptability. This segmentation allows businesses to liberate growth-oriented bets from the compliance-driven mindset that often stifles innovation and progress.

 

Understandably, businesses need to shift out of ‘defensive’ mode to adapt to systems that make growth bets part of everyday business rather than rare, high-stakes gambles. Here, a common approach is the ‘70-20-10’ model: spend about 70% of resources optimising the core business, 20% expanding into adjacent areas, and 10% on bold new options. This balances stability with innovation.

 

Growth also comes from repeatable, smaller moves, like partnerships or midsized acquisitions, rather than relying only on one big bet. To support this, businesses can set up ‘fast lanes’ for small experiments with clear limits and implement more rigorous reviews for larger investments.

 

Just as importantly, leaders can keep employees and stakeholders engaged by explaining where experimentation is encouraged and where rules remain strict; this will help them to understand that risk-taking isn’t reckless but is supported, structured and purpose-driven, creating higher levels of trust and therefore innovation.

 

 

Embracing change to stay alive

While risk aversion has its place in safeguarding businesses against preventable losses, an excessive focus on playing it safe can hinder growth, innovation and adaptability in an era of rapid change. The accelerating pace of disruption and the evolving nature of risks demand a shift in mindset, one that views risk not as a threat but as an opportunity for strategic advantage.

 

Let’s take Amazon as an example. Jeff Bezos often described decisions in two different categories: “one-way doors” which are hard to reverse and require caution, versus “two-way doors” which are reversible and therefore worth experimenting with. This thinking allowed Amazon to launch and kill products quickly. For instance, the Fire Phone was a fast failure, but it paved the way for Alexa and Echo. By explicitly classifying risk, businesses can create cultural permission for small-scale experiments, without fear of long-term damage.

 

Leaders must foster this culture of embracing experimentation and calculated risks, as it will help growth bets to integrate into everyday operations. By reframing risk as a driver of opportunity, rather than a barrier to progress, businesses will be better positioned to thrive in today’s dynamic and uncertain landscape. The answer is clear: adapt with confidence or risk being left behind.

 

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Professor Serkan Ceylan is Dean of the Faculty of Business and Innovation at Arden University

 

Main image courtesy of iStockPhoto.com and NicoElNino