How to Use Risk to Your Advantage When Negotiating

Negotiating is a complex process that involves an inherent level of risk. There is always some uncertainty regarding outcomes and the potential for both gains and losses. Taking too much risk can expose you to legal, reputational, or financial damage while taking too little can limit your opportunities or value.  While many people may be leery of risk, it can actually be used to your advantage when negotiating if approached strategically. Here are some tips for understanding and leveraging risk in order to increase your bargaining power and achieve better outcomes. 

Evaluate the Risk Involved

First and foremost, you need to identify and assess the level of risk that is involved in the negotiation. You need to have a clear understanding of the potential consequences of different outcomes and the chances that they might occur. When you have a strong knowledge of the risks involved and how it can affect the final outcome, you can make more informed decisions and develop strategies to mitigate those risks. 

Use Risk as a Bargaining Tool

One way to use risk to your advantage is to use it as a bargaining tool. For example, if you are trying to negotiate a lower price from a supplier, you could threaten to stop giving them your business as a form of leverage. When the supplier sees they are at risk of losing your business, they may be more inclined to give you a better deal .

Understand the Needs of Your Counterpart

Another way to use risk to your advantage is to research and analyze the interests, goals, strengths, and weaknesses of your counterpart. This will help you to anticipate their concerns and motivations so you can tailor your strategies to meet their needs. The more you know about your counterpart, the better you will be able to assess and perceive their risk tolerance and how they are willing to manage it. 

Use Risk to Create Value

Another negotiation tactic is to use risk to create value in the negotiation process. By taking on risks that the other party would not be willing to take, negotiators can increase their bargaining power. For example, you might be willing to risk delivery delays in exchange for a better price. This can lead to a mutually beneficial outcome for both parties. 

Build Trust and Strengthen Relationships

Negotiators can also use risk to build trust and strengthen relationships with the other party. By being transparent about the risks involved and showing a willingness to take on some of the risk yourself, you can foster a sense of trust and collaboration with your counterpart. This can lead to a long-term relationship and more productive negotiations in the future.