Step 3: Risk policy
The idea of a risk policy is to help guide your own actions and the actions of others who do work on your behalf. Ray Dalio, founder of hedge fund Bridgewater, talked at length about getting the right kinds of actions through the right ‘policy’ foundations in his book Principles.
When creating a business risk policy, note it has to be customized to what you do. For example, Dr. Rosen’s company d1g1t is in the financial analytics and wealth management space, so risk policy would be things like the kinds of accounts and investments work for clients. In other industries, such as sports, for example, risk policy might be more focused on injury prevention and optimizing technique.
Think specifically of your goals and tolerance/capacity when creating mandates. In general, think of policies or mandates that help you:
- Capitalize on growth opportunities
- Keep you on track toward your goal
- Minimize loss
- Help you automate decision making (e.g. decision-tree frameworks or escalation pathways)