Archive 2014

Poker and Business Part 2 – Risk Management

By Gareth Chantler Posted at 7:46 pm on 2 May 2014

by Full Tilt Poker

Risk can be effectively managed by creating boundaries with which a strategy, or business plan, stringently adheres to. Having realistic expectations with regards to your own abilities and, more importantly, how much money you can afford to lose will result in you, or your business, becoming more profitable.

Ne sure to check out Part One here.

In poker, bankroll management is an important aspect that can sometimes be inadvertently overlooked. By budgeting correctly and playing within your limits you will be able to avoid embarrassment.
If you play too high too early, or go all in after only a few hands, you run the risk of going bust from a short spell of bad luck even if you are playing well. A good rule of thumb is to make sure you always have at least 20 buy-ins when you enter a game.

Moreover, a difficult skill to master, but one that will limit the amount of money you could lose, is being able to implement the concept of Sunk Costs into your poker strategy i.e. a past expenditure that has been incurred and thus cannot be recovered. If you have placed money in the pot and the cards that come up post-flop are unfavourable, sunk costs can be exemplified by your ability to fold your hand without regard to your investment.

If you approach the pot knowing that any money you have placed in it no longer belongs to you it will help you become more tactful and strategic when placing bets. It will also ensure that you are reliant on the knowledge that you have amassed whilst playing rather than being driven by your emotions.

With regards to business, implementing the concept of sunk costs will undoubtedly help with risk management. By creating a strategy and strictly adhering to it, a business can foresee future costs that they may incur and adapt accordingly.

For example, a company spends £250,000 on building a new store. However, after spending their allotted budget the store is still not complete. This can be viewed as a sunk cost of £250,000 because there is no way of getting the invested money back. The company must now decide whether they should spend more money continuing the development of the store and if this will help the company regain the sunk cost, or, whether it should walk away from the incomplete project.

Part Three can be found here.

Gareth Chantler,

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