For some risks, ROI doesn’t measure up



Video transcript:

The problem with ROI is that it doesn’t satisfy one of Peter Drucker’s requirements and that is looking at risk from three distinct possibilities. The first possibility is a risk that a business can afford to take. The second is what is a risk that a business can’t afford to take. Of course, the third one, which is what is a risk that a business can’t afford not to take. It’s that third category of risk that’s really the problem because ROI will never cover that. There is no such thing as an ROI on something about a business risk that you can’t afford not to take. Classic example of this would be something like email. There is not a single accounting firm, in fact there is not a single business in the world, that ever did an ROI on their email system. They just had to have it, and that’s what’s happening right now with some of these converging technologies such as AI and, of course, big data and even blockchain and perhaps even bitcoin to a certain extent, is that these are risks that they can’t afford not to take. If they try to do an ROI on them, they are never going to see anything positive from that.

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