Risk – Return – Reward: Does it still hold good ??

The ROI (return on investment) has always been measured against the risk involved in it. Business success has always been attributed to the risk appetite of the Management. High risk-High return strategy in spite of the current slowdown still looks good. However organizations across will have to rethink and look beyond the conventional risk-return approach. The Current situation is very demanding especially with lesser liquidity available for future investments. This requires the entry timing to be spot on, else there would be a major erosion in the value of the investment.

Approach followed by companies will broadly fall under the below three categories:
1) Wait and watch approach – They will shy away from any major investments and wait for the markets to stabilize. Risk Averse companies might be safe but will end up missing out on prospective and cheaper investment opportunities.
2) Cautious approach – These companies will be investing but with Limited risk appetite and with an expectation of a nominal return on it. The focus for these companies will be to hold on to its current market share and not on entering new markets.
3) Risk-return-reward approach – As always there will be High risk takers with spot on market timing for investment. They stand out of the league and emerge winners when market gets back to normal. However the percentage of this group compared to the overall number will be very less.

High risk takers will go for the kill by not only looking to consolidate their current position but by also capturing market share of competitors. Thus Risk-return-reward approach executed with proper understanding and timing of market will yield phenomenal ROI.