Advantages of Spreading The risk
I have a friend who is from the colony where I grew up. Very brilliant guy, All India topper in Senior Cambridge exam, then IIT Mumbai ,IIM Ahmedabad...ex Citibanker and then a promotor of a successful finance and leasing company. He had an office in Nariman Point in Mumbai and I used to drop in for 10-15 minutes chat whenever I used to be in that area.
One day I dropped in at lunch time and he ordered some lunch for both of us from outside. As we were waiting for the luch to come, in the meanwhile his secretary came in and informed that the MD of a difficult account which they had given some machinery on lease is on the line. My friend told her to put him on the line...then next 5 min the conversation went on in which my friend was very strongly telling him to pay up the dues or his company will file for winding up petition against the defaulting company for dues recovery...
I was very surprised that my friend was talking tough with the defaulter company MD inspite of his money being stuck up...normally in such cases one expects concilliatory talk, installments, rescheduling...request for payment etc.... I asked him how can he talk so tough with the other guy...he may get offended and not pay up at all. His answer was an eyeopener for me regarding taking business risks. He said that their company policy is not to take exposure of more than 2 % in a single company and not over 5 % in a business group...so he can afford to talk tough and tell the defaulters who are willfully defaulting ...and he said that he is very sure that the payment will come after the tough talk and if it does not, then they plan to proceed against the company as the stake was only 2 % maximum....if the stake was 10 or 20 % then he would be begging for getting the payment.....
So true in our trading too..with 1-2 % risk we dont care if the trade goes bad but a trade with 10 or 20 % risk puts us in hope and prayer mode....
Smart_trade
I have a friend who is from the colony where I grew up. Very brilliant guy, All India topper in Senior Cambridge exam, then IIT Mumbai ,IIM Ahmedabad...ex Citibanker and then a promotor of a successful finance and leasing company. He had an office in Nariman Point in Mumbai and I used to drop in for 10-15 minutes chat whenever I used to be in that area.
One day I dropped in at lunch time and he ordered some lunch for both of us from outside. As we were waiting for the luch to come, in the meanwhile his secretary came in and informed that the MD of a difficult account which they had given some machinery on lease is on the line. My friend told her to put him on the line...then next 5 min the conversation went on in which my friend was very strongly telling him to pay up the dues or his company will file for winding up petition against the defaulting company for dues recovery...
I was very surprised that my friend was talking tough with the defaulter company MD inspite of his money being stuck up...normally in such cases one expects concilliatory talk, installments, rescheduling...request for payment etc.... I asked him how can he talk so tough with the other guy...he may get offended and not pay up at all. His answer was an eyeopener for me regarding taking business risks. He said that their company policy is not to take exposure of more than 2 % in a single company and not over 5 % in a business group...so he can afford to talk tough and tell the defaulters who are willfully defaulting ...and he said that he is very sure that the payment will come after the tough talk and if it does not, then they plan to proceed against the company as the stake was only 2 % maximum....if the stake was 10 or 20 % then he would be begging for getting the payment.....
So true in our trading too..with 1-2 % risk we dont care if the trade goes bad but a trade with 10 or 20 % risk puts us in hope and prayer mode....
Smart_trade